Interview Date: Wednesday July 15, 1998
Interview Location: Denver, CO
Interviewer: Jim Keller
Collection: Penn State Collection
Note: Audio Only
KELLER: This is the oral history of John V. Saeman currently chairman of Medallion Enterprises, former Vice Chairman – CEO of Daniels and Associates, and its related companies, former chairman of the NCTA in 1982 and 1983, former chairman of C-SPAN 1981-1982, broker, financier, and investment banker. Currently on the board of the Cable Television Center and Museum, and a noted philanthropist. John, with that introduction, please start by giving us just a brief statement of your background prior to getting into the industry.
SAEMAN: Jim, there wasn't much for me before I got into the industry. I graduated from Loras College in Dubuque, Iowa in 1958, went into the Marine Corps for a short spell back in the days when we had a peacetime military and no draft. I went into the Marines under the reserve program and was six months active duty, five and half years reserve. Following my Marine Corp time, my first job in the secular world was with United Airlines in a training program in the Los Angeles area. After approximately 1½ years with UAL, I spent 3 years as a sales executive with A.M. Corp. During this time, I became friends with a few Lear Sieglar employees, an aerospace company in the LA area. They were just entering into a joint venture with the Reuben H. Donnelley Corp., a subsidiary of Dun and Bradstreet to start a company called Subscription Television, which launched in 1963. I interviewed with the Donnelley part of that business and was hired on in the area of sales. That was my introduction to the world of telecommunications, if you will. As many would suggest, the Subscription Television effort was one of the forerunners of pay TV. There was an Oklahoma experiment that had gone on a bit earlier, but the subscription television effort in California which actually debuted in early 1964 was a 3-channel coaxial system, one channel dedicated to sports, one to movies and one to the performing arts, the Bolshoi Ballet, Segovia on guitar, Goran on bridge etc. etc.
KELLER: This was Pat Weaver's enterprise?
SAEMAN: People credit Weaver for it. Weaver was really the late entry into the effort. Weaver came in at a point in time where the ship was not rudderless, but it was having some real problems because the National Association of Theater Owners had already mounted a war chest and were going to take this to the California voters under an amendment to the electorate in November of 1964.
KELLER: We know so little about that project, and it doesn't come up too often, but you did say it was supposed to be distributed via coaxial cable.
SAEMAN: It was distributed via coaxial cable. We wired a defined area in Los Angeles, it was West Los Angeles, and also wired an area in Northern California, so we had both a Northern and the Southern California presence. The only distinction between the two was the Southern California segment had the Los Angeles Dodgers under a play for pay contract, and the Northern California group had the San Francisco Giants. Other than that, movie fare and the other activities were common to the two service offerings. So it was an installed coaxial cable system, with amplifiers and everything that you and I would relate to, strung on telephone poles throughout that service area, as defined in those early days, with the ultimate intent that it would be expanded to both of those major metropolitan areas, and ultimately across the country.
KELLER: I have some experience in San Francisco. What areas of San Francisco were they working?
SAEMAN: In the San Francisco area I don't honestly remember. In Los Angeles which is where I worked, it was an area that was bounded by Olympic Blvd. on the north, National Blvd. on the south, La Cienega on the east and I don't know on the west, but a fairly tightly confined geographic area.
KELLER: Were franchises awarded for this particular purpose?
SAEMAN: No. It was state approved...Jesse Unruh at that time was Speaker of the House in the state of California, and whatever the jurisdiction or authority that was given came from the state.
KELLER: Certificates of "convenience and necessity"?
SAEMAN: Probably. But I'm not positive Jim. That was an area that wasn't my forte at the time.
KELLER: I've often wondered where the authority to string cable came from or whether you were leasing from the telephone company?
SAEMAN: We were leasing from telephone companies. And in fact what ultimately put that company into the financial mudhole, was that we were having difficulty, not unlike the cable operators, getting access to poles. So somewhere along the line, the combined board at Subscription Television made the determination to provide some real focus, bringing in a high profile guy like Pat Weaver would be very, very helpful to the process. And so Pat Weaver was brought in and within two months, Pat Weaver thought he had done the greatest thing in the whole world for Subscription TV. He entered into a lease back arrangement with the telephone company, the charges of which were so ridiculously onerous, that if we hadn't been destroyed by the referendum, we would have been destroyed by ourselves. Therefore, the plant did get built, in a very rapid period of time under the deployment of the phone company operating under that leaseback agreement.
KELLER: Tell us about the referendum.
SAEMAN: Well, the process itself you know about of course. The forces that play with the National Association of Theater Owners, NATO. Moreover, NATO got energized for the pure and simple fact that one of the channels of this three channel coaxial system was dedicating itself to first run movie productions in the home. So it's pretty obvious to see why they would get energized. They didn't want people going to their living room couch to watch a first run movie; they wanted them to go out to the theater. They put together an impressive war chest, with dollars from all over the country flooding into California, to help wage battle on that front. We had the real underdog position because anybody and everybody who ever went into a theater from the time that we got started until the battle was lost, were seeing trailers in the movies theaters about this terrible thing—subscription TV and what it was going to mean, and the thrust of it was that it was going to destroy free TV. Not that it was going to be a negative impact on the theater business, but if you allow this to happen, if you don't vote for our referendum, basically you are going to allow all your television to be taken away. Next thing that goes is the World Series, and pro football and all of this will be taken from you. So it was a big scare tactic and we had very few dollar resources to dedicate to this. They had an infinite warehouse of dollars, and we were thrashed, would be a kind way to say how it came out.
KELLER: There were those people who said that perhaps subscription television gave up too early - that there was some question about the constitutionality of that referendum. I believe there was some attempt to go to court to overturn the referendum, then it was dropped at some point. It is very nebulous in my mind. Can you give us a little bit of information on that?
SAEMAN: You bet. In fact that's kind of a good segue into my introduction to cable, because basically, when in November of 1994, the California electorate voted so overwhelmingly in support of the National Association of Theater Owners referendum, the next step is what do we do. We were a company with very little resources. We were in effect told that we had to shut down because what we were doing was unconstitutional. So operations ceased to the extent to which there was any revenue coming in, it was gone. Subscription Television as it existed had to seek protection of the courts. At the same time, their significant and principle investors in the form of Lear Sieglar and Donnelley said what are we going to do? We don't want to shut down this effort. Therefore, they kept a core group of about four or five of us around. I was kept on from the sales side. I had become sales manager of the Southern California operation so they kept me. And they said "SAEMAN:, since you're the sales guy, we need you to find something to keep us busy while we take this thing through the courts. I'm 26 years old, I don't know when to come in out of the rain, but I start to look around, to do some brainstorming and see this thing called cable television.
I said, "Here's a reasonably new industry. There are a number of these systems around Los Angeles. If my sales people working at subscription television, myself included, could knock on doors or solicit via telephone, and via the mails to convince people to pay us five bucks a month for the privilege of having cable in their homes and then pay for each program they watch, it seems to me we could use those talents pretty well and convince people to subscribe to cable TV. So, I put together a game plan to call on cable operators, and see if we can prove this theory to be correct. I was authorized to do that, and my first customer was a guy named Dean DeVoe, an early cable pioneer who had cable systems in Barstow, Palos Verdes Peninsula and Sunland Tujunga in Southern California.
KELLER: Incidentally, Barstow was my first managerial job. I was the first manager after Dean sold the system.
SAEMAN: But in any event, I had talked to many cable operators around the LA area, all of them that I could reach. Dean was jokingly receptive. He said "You're wasting your time but the way you propose it to me, it isn't going to cost me anything, so why wouldn't I do it. You seem like an honorable guy, you're not going to go in and screw it up. Worst thing that's going to happen is that I'm not going to get any subscribers out of it, but it isn't going to cost me anything. So we put together a plan. Our first attack was on cable systems in Sunland Tujunga. It was a small market, and I don't remember the numbers now, but we put together a pro forma for a campaign that would last for four weeks and have the components of direct mail, newspaper advertising and door to door solicitation. We got out the list of homes that were non-subscribers and estimated that we would get at least 320 of them to sign up for cable. That gave Dean a good laugh, but he gave me the go ahead. And, in fact, we met our target. I recall I had a sliding commission scale, the first ones were a little more expensive than the later ones, but the net effect was it cost them about twenty dollars apiece to get 320 more subscribers than they had before. Dean was ecstatic with the result and that kicked off what we called the National Consumer Services Division of Reuben H. Donnelley.
KELLER: That had to be at least a ten percent increase in his number of subscribers.
SAEMAN: That was about a 12 percent increase in his subscriber count. But keep in mind he'd never done anything other than build the system. If you build a better mousetrap, people will come. So it was significant. We were pleased with it. It wasn't the kind of thing obviously that you look at and say "What a great business, we're going to make a lot of money here." Again, Donnelley's focus was how can we keep a cadre of people alive while we pursued overturning the referendum in the courts. I was a full time employee and I was bringing the sales people back on a contract basis. We paid them so many dollars for every customer that they would bring in. Dean then gave us his other cable system. I then contacted Lee Druckman and Hank Goldstein in San Diego. They hired us and we did a fairly large area of El Cajon. In El Cajon we were selling the importation of the Los Angeles independents, plus improving the local network signals. Therefore, we did a good job for Lee and Hank Goldstein. Then in the course of that, as we decided that we had a business and it was worth continuing, I started to go to a few cable conventions. The first one I went to was probably in about September of 1964 in Phoenix hosted by Bruce Merrill at his AMECO offices. It was the first time I'd ever been to an industry gathering and I remember among the first guys I met were Stan Searle and his partner Pat Pogue who were starting a magazine for the cable industry. We became friendly and fed off each other a little bit. In any event, I started to talk to other cable operators, and we were keeping our crews quite busy.
Then in November of that year, there was an Arizona show in Phoenix. I went to it. I had met Bill Daniels in his office in Denver where I had pitched him on our services for the cable systems that Bill managed. At the show in Phoenix I bumped into Bill again, and I remember as I was leaving the hotel, headed back to Los Angeles, I was paged in the lobby of the hotel. I went to answer and it was Bill. He said "John, I want to have a drink with you." I said "No, I can't, I've got to catch a flight, because I have to get back to LA." He said, "Are you going to be in the office tomorrow?" "Yes!" Bill said that he would call. Next day the phone rings in my Donnelley office, and it's Bill Daniels. "John, I want to make you a millionaire. I want you to come to work for me." That opening certainly got my attention, but I must say it did not sound very believable. Bill and I then carried on a dialogue over a period of time which included periodic reports on the progress of our sales efforts in his managed cable systems in Kansas and Louisiana. I told my boss at Donnelley that I had this job offer and I didn't really think I wanted to take it, but just wanted to see what he thought of it. His first reaction was "Well, let me run a D&B on this guy." When he came back, he said, "You wouldn't want to go to work for this guy, believe me." He showed me the Dun and Bradstreet report and explained what it meant. I thought to myself I called on this guy, he had a really nice office and it looked like he was very successful. This kind of put me back a little bit because I didn't understand the vagaries of all that very well at the time. But, as time went along, it became more and more clear that this issue with the courts was just going to drag and drag and drag, and if I wanted to get on with my life, I probably ought to start listening to guys like Daniels and looking at opportunities. So in May of 1965, I came into Denver. Bill and Carl Williams had just parted company. I had met Carl along the way, and had also met Bob Magness in his office in Bozeman, Montana. So when I came to Denver, Carl and I talked but Carl didn't have anything definitive at the time. Bill was more specific, and Bill said, "Here's what I'd like you to do. I want you to come in and do for me and our systems what you've been doing on a contract basis for these other people" I think by that time I was also working in Parsons and Chanute and a couple of the Kansas properties that were under management. And so as I listened to Bill, I said "Bill, I would like that, but I don't want to spend the rest of my life doing what I'm doing here. What really interests me about what you do is the deal making side of the business. I will take this project on and bring that to you with the understanding that I want you to teach me the other parts of this business. I want to know what it's like to finance a system, what it's like to broker a system. So I'll do this for you, if you'll do that for me. So that's the deal Bill and I made.
KELLER: Who were the people with Daniels at the time you joined him?
SAEMAN: Monty Rifkin was the president of what was called Daniels Management Company. I never met Monty until the day I came to work and Bill said " I want you to meet Monty Rifkin and he took me down and said, "John this is Monty and you'll be working for him. So Monty was there, Dick Zell was the chief financial officer, Ross McGregor, a Canadian was a vice president with the primary function of consulting. He was doing consulting work for people who were looking at the feasibility of building cable systems. Alan Harmon was there. Alan was the broker, along with Bill. So, in May of 1965 when I joined Daniels, there were six of us (counting Bill and 3 secretarial support staff).
KELLER: What systems were you managing at that time?
SAEMAN: Monroe, Louisiana, Parsons, Chanute, Independence and Neodesha, Kansas. We had just added the systems in the communities of LaGrande, Baker and Union in Eastern Oregon as well as Fallon and Yerington, Nevada. Shortly after that, I remember one of my trips was to escort a banker out for a due diligence visit to finance the cable systems in Saugus, Newhall that we were buying from George Acker and Ray Miller. The banker was as green to the bank as I was to Daniels, but I knew the Saugus Newhall area, so I'm taking this guy around the Saugus Newhall area. We had flown out early in the morning from Denver, and about 11:00 he said "Ever go to the racetrack?" and I said, "As a matter of fact, I do once in awhile." He said, "What do you say we go to the racetrack." So I thought well, he's the banker. So off to the racetrack we went. Turns out the guy's name was Terry Murray who's now chairman and CEO of Fleet which is one of the largest banks in the country. He was a junior loan officer who had just recently joined the bank.
KELLER: Narragansett Capital?
SAEMAN: Yes. All of those systems were as a result of the relationship that Bill had built with Royal Little. So Narragansett Capital in large part, was the acquiring entity that owned these various assets around the country.
KELLER: And then the progression was that most of those systems went on to become ATC. The Oregon ones did not at that time.
SAEMAN: No, they did. Royal Little had three pots of money and he filled them all with cable investments. Narragansett Capital was a venture capital company. Then Memorial Drive Trust, which was the employee pension fund of the A.D. Little Co. that was the think-tank group in Cambridge. Then 60 Trust that was the employee pension fund of Textron. Royal Little put the maximum allowable dollars of exposure that he could out of each of the pots of money that he controlled into the cable systems through Bill and Monty. It was an unbelievable thing to watch. Go out, find these cable systems, write the presentations and Bill or Monty would send them to Roy. To my knowledge, Royal Little always said yes which was a real tribute to Bill Daniels and the relationship he had built. Therefore, it was an unbelievable experience, as they were just buying up these systems at various places around the country.
KELLER: Eau Claire, Wisconsin was in there too.
SAEMAN: Yes. Eau Claire, Wisconsin was and the Palmer Broadcasting systems in Palm Desert, California were under management at that time. Keith Burcham and Bill Ross were both employees of the Palmer systems and both later came to Denver to work for Daniels. The Naples systems were added to the Palmer assets in maybe 1966-67, something like that. And other than Palmer properties, everything that was a part of what was built during that period of time went into what became ATC; namely, the Oregon, Nevada, California, Kansas, Louisiana and Wisconsin systems. Monty became President and CEO and left with those systems in 1968. I moved to California in 1967. The cable sales and marketing activity we had started in late 1964 at R.H. Donnelley now had some momentum and new players. Del Henry and Mark Van Loucks were in fairly early and operating out of Northern California. I didn't really like the business and I was able to convince Bill that I would like to concentrate my energies in the area of brokerage. In the summer of '67, I convinced Bill and Monty to allow me to go back to California, which is where he hired me from, and to concentrate my energies on building the brokerage business. So I moved out there in October of 1967. Monty wouldn't let me go out there without having a tag on me and the tag was that I had to watch over the Saugus and Newhall systems along with the systems up in Arvin, Tehachapi and Lamont, as well as the Nevada systems, the Oregon systems, and we managed a system for a gentleman named Scoop Russell who was an NBC lobbyist. He owned Ellensburg, Washington. So I had the oversight of those systems, plus was free to do brokerage and consulting as time permitted. I had crafted a compensation plan for myself which Bill approved. I had been involved in several cable systems sales while I was in Denver. I sold one of Bruce Merrill's systems in Pecos and Fort Stockton, Texas to the old Transcontinental telephone company out of Dallas that later became part of Continental Telephone. I had been involved in several others, but mainly as a support to the overall team. I had gotten several listings by myself, but I never took one from A to Z. As I got involved in California, I started getting to know all the players out there and what they were doing. I started to pitch the Daniels brokerage services. Early on, I was able to get a listing agreement from a guy named Bob Cannon who started Cannon Electric, and Cannon Electric sold out to ITT. Bob had started cable systems in Palos Verdes and San Clemente with a couple of cable guys who were former North American engineers, Bob Hilliard and Vern Gill, who became very good friends of mine. The interesting thing was, first of all, it was a fairly big deal. It was a $4 million listing which was a lot of money in 1967. I ended up selling it to the Times Mirror Company. It was their first foray into the business, and the first thing that I did from start to finish by myself. The price that was ultimately agreed to was $3.6 million cash. The commission agreement called for Daniels to get five percent. All I could think about for the two or three months prior to the closing was that I was going to be forced to reduce my commission. I had that experience with the little Fort Stockton, Pecos deal that I did for Bruce Merrill and was forced to reduce the commission at the closing table. So I was totally expecting to get hammered at the closing. To my surprise: nothing but praise, did a great job, really appreciate it and a $180,000 dollar check. I walked out the door and almost fainted. I couldn't believe it. At about the same time, I'd started on a transaction with Al Gilliland. I was representing Al in the sale of his Chico, California system. I had established a relationship with Charley Theriot of the San Francisco Chronicle Publishing and Broadcasting Co., who I ended up selling a lot of other systems to as the years went on as well. Charley was very interested in Chico and in a matter of three months following the closing of the San Clemente, Palos Verdes transaction, I had the Chico transaction closed for $2.6 million and a commission of $130,000. I was off, running, and needless to say, excited about the brokerage business.
Fast-forwarding a little bit from that, I continued to do that. I was actually working out of my house in the Saugus Newhall area where we had a system. Moreover, I was still taking care of those other systems as well. We represented Scoop Russell then to sell the system in Ellensburg. I sold that to King Broadcasting, which got them into the cable business. I was doing work for the Seattle Times and would ultimately sell them a system as well. I got a call from Bill one day, and Bill said "What I'd like you to do is come back to Denver and do for me on a nationwide basis, what you've been doing out there on the West Coast. Brokerage had become a very profitable activity for the company. You remember the early Daniels days and how we lived from hand to mouth.
KELLER: Many years prior to that.
SAEMAN: Years prior to that and years after that. But, in any event, I remember when I closed the first transaction with Times Mirror, Dick Zell, our financial guy, was in town to pick up the check. I'll never forget that. But in any event, Bill and I talked over a month or two. I really loved California and had always loved California living.
KELLER: Were you a Californian originally?
SAEMAN: No, I'm from Wisconsin, born and raised in a little farm town back there. During the college years, my roommate and I went to California, worked construction. I just loved the lifestyle. So when I got out of the Marine Corps, I moved out there. And I was really happy to move back and get away from Denver and be independent out there. See what I could do by myself.
KELLER: The operation in Denver...I'd already left by that time.
SAEMAN: I know but it's not that far after. It was really management oriented under Monty. Bill was tending to industry things and working on deals. Deals were an important part of the business, but it was never really structured as a business, like if you really want to make a business out of this, what are the things you would do. How would you staff it?
KELLER: Ironically though, the management company was formed because he had systems that he had sold to people who didn't have management capability. So, the management company was formed to manage the systems until such time as they took over.
SAEMAN: That's right. However, the interesting thing about the early years at Daniels, as you and I both know, was Daniels' unbelievable relationships. He created relationships with a few key people. Royal Little, C.A. Sammons, Alfred Stern, and those people ended up buying lots of systems, which Daniels ended up getting brokerage fees for and, in many cases, managed.
KELLER: In some cases, a piece of the action?
SAEMAN: In most cases a piece of the action. So it wasn't like Bill was really a brokerage company. You could almost say that Bill was a guy that was building an industry by interesting people to come into the industry, being perceptive and alert enough in his own mind to say I could probably get a piece of the action, if I structure this right. That's exactly what happened. In terms of operating a brokerage company on an independent basis, where you're really seeking out people who want to sell and identifying people who want to buy, that was unique. Bill's mode was I found somebody who wants to buy, I can be a part of the buyer, and the financing is in place, and then I'll manage them. So really not brokering them. I'm calling myself a broker, but I'm not really brokering them.
KELLER: But there was another facet to Bill. At the same time he was working on financial institutions. At the time when he was able, as I recall being able to come to an Al Stern on his own, he already had somebody who was able to finance the deal.
SAEMAN: I think in large part that is true and in the cases of guys like Roy Little, he brought the financing with him. What happened with Stern I don't remember. Sammons brought his financing with him. But in any event in 1972, I came back here in February with the mandate from Bill to take over and expand the brokerage division across the country.
KELLER: In '72, ATC had already been formed so those systems were pulled out from under the management company.
SAEMAN: Yes, Monty and those systems were gone at that point. They had become a separate company about 1968. So those systems were gone. Monty was gone. Harmon was gone and Ross McGregor was gone. In addition to restructuring the brokerage division, we were seeking a new equity partner, and additional investment opportunities. Our only remaining managed properties were Palm Desert, California and Naples, Florida, the Palmer systems.
KELLER: So in effect, you were starting all over again.
SAEMAN: We were starting all over. And that's when we did a round of interviews with various people that Bill had interested in investing in cable. Looking for a source of a new investor to build a new operating company. And that became Traveler's Insurance through a venture capital arm of theirs called the Prospect Company. They put seven and a half or eight million dollars into a company called DPI, Daniels Properties, Inc. and we bought Bruce Merrill's systems in Temple, Waco, McGregor, Texas. We also bought the Killeen, Texas systems from the telephone company there. We made some additional acquisitions in Greenville, Texas, Sheridan, Wyoming and Fallbrook, California. I basically quit doing brokerage myself and began hiring top sales people who I had known or been exposed to over the years. The first guy that I tapped to bring with me when I came back to restructure the brokerage in 1972 was Hugh McCullough. Bill hired Ed Zuckerman. Shortly after, I hired Vern Milligan, then Bob Holman and later Bob Brown and others. Then in 1974, early in the year, Bill made his decision to run for governor. One of the guys that had been working in the field for us was a guy named Jerry Buford, whose mother was a broadcaster from Tyler, Texas. She had approached Bill back in the late '60s and said "If you have a place, I'd really like my son to get some exposure to cable TV. Bill hired Jerry who went to work in Monroe, Louisiana at a cable system there, ultimately becoming manager of the cable system. Jerry was a University of Texas graduate. In the interim, between my going to California and coming back, Bill had brought Jerry into Denver. And so now I'm back in Denver and my job is to restructure the brokerage division. Keith Burcham was brought in from Palm Desert to head up the operating properties as president of the operating company. Jerry was a corporate guy, he loved contracts and negotiations and financings and things of that kind. Early in '74, Bill called Jerry and I in, and said, "I'm going to run for governor. I'm going to resign from all my titles at the company, and over the period of the next 60 to 90 days I'm going to make a determination as to who's going to succeed me, and it's going to be one of you guys. We need to get the blessing of Traveler's because they're our investor partner in the cable side, but if it's left to me—one of you two guys is going to be president.
About the same time, we brought Bob Clark in who helped Bill make a deal in Baton Rouge. We signed a contract to design, build and manage the system for Baton Rouge. I never thought for one minute that I would be chosen over Jerry, because I thought Jerry's a contract guy and he has the disciplines that I don't have. Bill called the two of us up together and said "John the decision's been made and I want you to be my guy. Jerry, I want you to support him." I walked out of there somewhat in disbelief. But that happened in 1974, and Bill went into the political race and ran for Governor. Bill had been the choice of the party to succeed then Governor John Love. Prior to Love completing his term, he was appointed Energy Czar and moved to Washington, leaving the Lt. Governor to take over as Governor. This now put Bill as an announced candidate running against the incumbent.
At the same time, Bill had made a major move in pro sports. He purchased the Los Angeles Stars of the American Basketball Association (ABA) and moved them to Salt Lake City.
Now to step back for a moment and reflect on our deal with the Prospect Co. When we brought them in as an investor, they took a collateral interest in all of the acquired assets, but did not take the stock of DPI. Bill began using the DPI stock as collateral to support the operations of the Stars. Bill at the time was President of the old ABA and very high profile. As the ABA ran into serious trouble, it merged with the NBA and most of the old ABA teams were shut down, including the Stars.
The bankers now turned to their stock in DPI, which was their security. We found ourselves dealing with bankers who wanted to foreclose on our cable company. I'm the new President and CEO of the company, in office only a short time when all this happens. We worked closely with the banks and our partners and bought time. As a result, we avoided bankruptcy. Our cable properties were growing exceptionally well and the passage of time, plus the health of the cable industry, saved us.
KELLER: Did the business actually own the Stars? Or did Bill personally?
SAEMAN: Bill did. But, he had used the stock of DPI to pledge as collateral to get loans for the Stars. Now the Stars are gone...
KELLER: So the systems were collateral for the Stars?
SAEMAN: No. The systems were pledged to Travelers. Bill used the stock as collateral for loans to support the needs of the Stars. We were never in jeopardy in our systems. I'm sure we didn't meet all the tests, but we weren't in trouble. Buzz Dewey (a loan officer at Bill's lead bank), I'll never forget him, he was pretty mean in terms of his approach and rightfully so, because he had to figure out how to make good on the collateral that they had. His first thrust was we're going to take it over and we're going to liquidate the cable systems. There really wasn't a lot of value in the cable system stock. How Bill got money out of the stock only you and I who know Bill well could understand. It's called salesmanship. And so we really needed the benefit of a couple of years to work through and get enough things going. Actually, I think the turn around point for us was that in 1976, I was able to get a contract to buy the cable systems from Lincoln Telephone and Telegraph Co. in Nebraska.
KELLER: That was when they were forced out of the business.
SAEMAN: That's correct. I had developed a relationship with a senior partner in the law firm of Woods & Aitken. The gentleman's name was Phil Aitken and he represented the phone company. He was like a father to me, he was that much older than I was. For whatever reason, he liked me, we got along well and we were able to succeed in tying up the right to buy that package of systems. Now the tough part: we had to raise the money for the purchase. Jerry Buford and I worked on the financing and after many difficult sessions, we were able to bring Allstate Insurance in as an investor. We created a new subsidiary in Daniels Properties called Cablevision Properties and acquired the Nebraska systems. Tom Johnson was with Bill when I joined Daniels in 1965. Tom had come up with this innovative movie package way back before other people had done it. So, while other people were looking at launching HBO, we already had our own pay products called Showcase I and Showcase II.
KELLER: Back up just a little bit to the Lincoln Telephone deal. In that deal when Lincoln Telephone sold the system, did they also permit pole attachment agreements as part of that deal? Or was that separate, or did they retain cable systems themselves or lease them back? How did that go together?
SAEMAN: It was an arms length deal, which included our rights to have access to their poles. There was no lease back. It was an outright purchase of all the cable assets they owned. Lincoln of course was the largest of the systems that they had. I think about it now and numbers are a little hazy, but I think we paid $7.7 million for about 14,000 subscribers. I remember that the equity funding that we got from Allstate was $2.8 million. That was the engine that drove that acquisition. And, that really was our key turning point for being able to work ourselves out of the DPI stock malaise that we had found ourselves in.
KELLER: The reason I brought that up was because right at that time (from the late '60s to the early '70s) when some of the other telephone companies were also divesting, there were some questions as to how they were going to go about it. Whether they were going to divest themselves totally of their assets, whether they were going to keep some of the assets and sell the subscribers. So I just wondered how that deal was put together.
SAEMAN: Ours was a clean sweep. They decided to get out. In all of the years that we did those kinds of things, Jim, I never was in one that was handled anywhere near as good. They were the most magnificent people to deal with. We announced our deal. They called a press conference over in Lincoln, Nebraska. I flew in and they introduced me to the press; a wonderful gathering of the business leaders of Lincoln, Nebraska. They just opened up and welcomed us to town and it was unbelievable. I never had that kind of an experience before. They had a wonderful relationship in that community. And to this day, I still have a lot of good friends in Lincoln, that are carryovers from those days—chairmen of the bank, and chairmen of the University.
So then, as we start to deal with the plate of assets we've got, we now still have this huge problem of how long are these banks going to sit still.
KELLER: As far as the Stars are concerned?
SAEMAN: The Stars are dead. Bill filed bankruptcy for the Stars, which he owned personally. The banks were sitting there with the stock, and they said OK we've been sitting here for a long time without getting paid. We aren't going to sit any longer. This happened in 1980, we go to the marketplace, and we sell DPI to Newhouse in an effort led by Henry Harris who has left Cox, joined up with Newhouse to go franchising for Newhouse. Henry's been franchising for about a year and said, "You know the big problem I'm dealing with is I've got no credibility. You talk about what a great operator I was at one point, but I can't take people to our systems to say look at this. How do I reestablish credibility here, I need to buy something." So we negotiated a deal with the Newhouse family which ultimately closed on the 31st of May of 1980 and about a month before the deal closed, S.I. Newhouse (the founder) died and we're of course scared to death that the deal is going to self destruct. But it doesn't. Everything moves through smoothly and that whole package of what we knew as DPI, with about 120,000 subscribers, moved out to Newhouse and Henry Harris and his group of guys ran it.
KELLER: Including Lincoln?
KELLER: So in effect you were starting all over again.
SAEMAN: Yeah, but we'd gotten a bit of a jump-start. We started to look at what opportunities were available to a private company like ours to raise capital. We had always raised our money via the private route. Years earlier, in about 1974, Bill had urged me to join the Young President's Organization ("YPO"). One of my good friends in YPO was Jack Rule. Jack was president of Integrated Resources Marketing, located here in Denver. When Jack and I got to be friendly, and found out what each other did, we started to talk about Integrated and Daniels creating some syndicated (private) cable offerings. In 1978, we did our first private placement with Integrated. We bought cable systems in Wood River and Alton, Illinois. Integrated syndicated a private partnership and raised the equity. We did a series of others behind that. So at the time we actually sold DPI in 1980, we had a small pool of systems that we were building up.
KELLER: Were these the ACT systems?
SAEMAN: No, these were preceding ACT. We started the ACT series in 1980 or '81. The ACT (American Cable Television Investors) was a public syndication effort and was also with Integrated Resources.
KELLER: I didn't want to jump that far ahead.
SAEMAN: We did a handful of private placements first. I think we had done maybe a half dozen private placements. Wood River, Alton Illinois, then we did Ann Arbor, Michigan and I brought Scripps Howard in as the equity investor. We did another in Southern California around Redlands. We did Baton Rouge, Louisiana, of which we were the manager and part owner. This was our largest at a price of $105 million. We did two other California systems in Northern San Diego County; North County and Carlsbad. In late '79, Integrated came to me and said "Listen, this is a slow drill, property specific and time consuming. We think we can raise significantly more dollars on a blind pool basis, giving you discretionary buying power. Thus, we started ACT I in 1980.
KELLER: Let's back up just a little bit. You mentioned Bob Clark coming in at that point. Then he went with Cablecom General down in Colorado Springs. Explain a little bit about the Colorado Springs situation.
SAEMAN: I don't know a lot about Colorado Springs. When I was leaving Denver in 1967, to go to California to be a broker, a couple of things were happening here. Bob Clark and Cablecom General were going up to Colorado Springs in a joint venture with Bill. Bill being the front guy. And shortly after that, I think in the fall of '67, Bill hired Glenn Jones. Glenn had just had a failed run at elected political office.
KELLER: But Glenn was associated with Bill in some respects. He was going after some franchises here in the Colorado area.
SAEMAN: Glenn was not with Bill when I was here. So it was right about the time I left, Glenn started working with Bill in franchising the Front Range. So '67 is the starting point.
KELLER: He may have had an office in the old KFML building at that point and was around in some respect. I don't know exactly what it was. I am interested and I think there would be a lot of interest in the Colorado Springs deal. How much light can you shed on that?
SAEMAN: The only thing I remember is that the Colorado Springs initiative started with a franchise in Manitou Springs. I think for Bill to make the decision to meet the construction deadline, he needed to sign a leaseback arrangement with the telephone company. I remember going down there along with Bill Ross, and everybody else in the office, to make customer hookups; to get our first customers hooked up on a weekend. The entry to the marketplace was through Manitou Springs, and that ultimately paved the way for the positive vote in Colorado Springs.
The other thing that I remember about Colorado Springs is that Bill gave me a project to go down and entertain television dealers, specifically those who were in the antenna business. I remember driving down there a couple nights a week to take folks out to dinner and talk to them about cable. We were friendly people trying to build positive relationships with the people in the antenna business.
Then before Colorado Springs actually got under construction, I had moved and gone out to the West Coast.
KELLER: I think the only time that Bill horrified the entire industry was with two of the conditions of the Colorado Springs franchise. You may remember. All underground, and the 25 or 30% franchise fee.
SAEMAN: Even the underground was a mind-boggling thing, because no one really understood what doing all that underground was going to mean.
KELLER: Or what the cost was going to be. No idea.
SAEMAN: In any event, Bob Clark played a significant role in that obviously, and I really don't know much about Colorado Springs, until I came back in 1972-1973.
KELLER: That was a financial disaster.
SAEMAN: Yeah, I remember Bob Clark had a red El Dorado convertible. Bob is here in Denver, back to coincide with the planning for Baton Rouge, which isn't underway yet. We were attempting to raise debt monies for one of our systems with the J.P. Morgan Bank. We took them for a tour of the Colorado Springs system. Bob Clark and I drove to Colorado Springs with the banker from the Morgan. He had a manicured beard and mustache, pin striped suit, and slicked back black hair. As we're leaving Colorado Springs to come back to Denver, he said "Well, our day's work is done, why don't we get a six pack of Coors. I've got to have my Coors." We picked up a six pack of Coors. I'm sitting in the back seat with this guy, top down, we're humming up I-25, talking philosophical things, and all of a sudden, a guy goes by on a motorcycle. The banker starts talking, saying "if my parents hadn't involved themselves in my life that's what I'd be doing. They made me do this, made me do that, made me go to this school, that school be respectable, you've gotta do this, you gotta do that, now I'm in banking. I'm all locked up. I feel all locked up."
KELLER: This is after a couple of beers.
SAEMAN: So he says "Bob, catch that guy." So Bob pulls up and we're zipping along about 70 miles an hour. Mike, the banker pops open a can and reaches out and hands it to the guy riding his bike. Ten minutes later the guy pulls up next to us and hands a cigarette to the banker. I'll never forget that. So, I never had much involvement in the Colorado Springs system, other than in the pre-launch of the Springs as they were getting Manitou ready.
KELLER: To pick up the chronology then, you had done some of these independently financed deals prior to going into the public limited partnerships with Integrated Resources.
SAEMAN: I would think we did about six private partnerships and then moved into the public partnerships and did a total of five of those. So that became our new set of lights. In addition to that, we created another entity, a private placement entity for which DLJ raised the equity.
KELLER: Who was DLJ?
SAEMAN: Donaldson, Lufkin & Jenrette. The primary investors in that entity were the John Hancock and New England Mutual Insurance Companies. We raised about $10 million in equity and we brought some cable systems into the structure of that entity, where we again were the managing general partner and they were the investor partners.
KELLER: It's interesting to note that now you're talking about these major financial institutions from Boston and New York coming in. Was this after the advent of the satellite delivered services? Now they recognized for the first time that there was truly a business in the cable industry. Would you agree with that statement?
SAEMAN: No question. I think some of this was pre-satellite, some of that recognition by banks was pre-satellite because even though cable had not demonstrated itself to be a world class business, by the middle '70s, it demonstrated world class characteristics to a banker. The predictability of cash flow was very attractive to the banking community. There were always issues of how much equity was needed, the quality of management and things of that kind. Cable proved to be a very financeable investment with many different institutions, not only commercial banks, but the likes of Economy Finance and Commercial Credit and the other people who you know got very actively involved in being lenders in this industry.
KELLER: Economy Finance much earlier than that. They were in it when no one else wanted in. A question I like to ask anyone who was involved in financing these systems, in the early '70s, is at what time in your pro formas did the banks allow you to use the income from "pay television". The HBO revenue and so on. And how much of that revenue did they allow you to use in the early days?
SAEMAN: You remember the difficulty we had at that point. Jim, I don't think I can answer the question. I'm trying to think specifically and I can't come up with a case. We bought the Temple Waco systems in 1972. The financing we did was without pay. We did the financing in Lincoln and those subs did not have pay, so those all came in later. I can't remember exactly when insurance companies finally said we'll give you credit for the pay revenue. I don't remember it as having been a terribly long time.
KELLER: I think a period of two or three years.
SAEMAN: I wouldn't have guessed it that long. It could very well have been.
KELLER: As I recall it, correct me if I'm wrong, at first they wouldn't allow any of it. They said it has to be financed on the basis of a classic system because that's all they knew. Then they said "We'll allow 25%, then we'll allow 50%, pretty soon they said OK, it's a going deal now. We'll allow you to use the entire revenue in your pro forma.
SAEMAN: I don't remember specifically to that extent the gradations of OK, now we'll let you have this much, that much. I just remember that the thrust was always to maximize the debt that you could get at any one time to every deal and you could do that in a number of ways. One, by maximizing the projected capability of the deal to generate cash flow, and if you didn't think you could get it off pay TV, you're putting it on the basic and somehow or another you were getting the financing you needed to make the thing work. But I don't remember much fine-tuning of the cash flow from pay.
I do remember a lot of discussions in our days with Traveler's and Allstate, having to do with the fact that the pay numbers were not performing on spec. Turnover was a much larger problem than anybody had originally anticipated. So, while the volume of subscribers was there, the quality of the subscriber was really an issue that we had to struggle with. I remember going back to the early '70s. You may have been a part of this as well. I can't honestly remember who all the people in the room were. We created an entity called CSAE. Do you remember CSAE?
KELLER: I wasn't in the room.
SAEMAN: The entity stood for Cable Satellite Access Entity. Bob Button, Hub Schlafly and a group of industry guys met on a quarterly basis from somewhere in the early '70s talking about satellite communication. I don't want to say that it was created by the cable industry, but it was created by a couple of guys in the cable industry who had the vision to say this thing could be a real factor for our industry. I remember sitting in there saying wouldn't that be something, not having the slightest clue that five years later, we would start to see the product off of the satellite. It never did anything. It wasn't proactive, it wasn't a lobbyist, and it wasn't a funded organization. It was just a group of people who were keeping current on the development of satellites through the eyes of a couple guys who were sitting in an engineering spot and able to define that this could work for us. It helped create the awareness that there's something here that's going to benefit the cable industry.
KELLER: You went back and said that Daniels Management had put together certain movie packages that you were using to enhance the product you were delivering to your customers in some of your systems. You used Tom Johnson's name at that point. What were these movie packages, where did you get them, and how did you put them together and how did you sell them?
SAEMAN: The packages were the brainchild of Tom Johnson, who was terrific at marketing. He put the packages together by negotiating for and buying the films directly from the studios. They were not first run films. We packaged them under Showcase I and Showcase II, two separate channels. And the channels differentiated themselves. One was a little more aggressive than the other in terms of product offerings, but they were movies that were ten, twelve, fifteen years old.
KELLER: What kind of copyright were you paying and what kind of deal did you make with the studios.
SAEMAN: I don't remember.
KELLER: At ATC at that time we also put together some movie packages in some of our systems that needed help.
SAEMAN: It was cheap, I remember that. It was a very low cost kind of a service.
KELLER: Then you put in a film chain at your headend or your office and ran it from there?
SAEMAN: That's correct. And it was a great boon. I remember we put it in specifically in the Waco market at start, because we didn't have very much to sell in Waco. We needed some kind of a boost to energize that market, so that's where it started and ultimately spread to all the systems we had including Baton Rouge and Lincoln and everything else we were operating. I don't know exactly when we went to HBO and the standard services, but we held out for a couple years because the profit margins on what we were doing were so strong, that even though maybe HBO and others had a more attractive product, we felt like we were getting where we wanted to go with the channel space that we had available, and doing just fine.
KELLER: Were you selling those packages as a pay offering or just as part of the overall service?
SAEMAN: No, it was a pay offering.
KELLER: John, in all of the deals that you've been involved in over the years, which is the most memorable deal for you?
SAEMAN: There would be deals that would be most memorable from a number of different respects. As a buyer, my most memorable deal was the transaction where we bought the cable systems in Lincoln. The people were terrific as was the community leadership and it was a wonderful experience. On the brokerage side, deals where we were in stiff competition with Wall Street firms, and were able to get the deal away from a prestigious firm, were the ones that were most rewarding. Because as a group we lived with this stigma that said "You guys are OK, but if you really want to do a large deal, you've got to go to Morgan Stanley or Goldman Sachs or someone like that." So, anytime we could go and bang heads against a Morgan Stanley and come out with the deal or co-management of a deal, it was tremendously rewarding for not only me, but also all of our people. This gave us the confidence that we knew this business better than any of those guys on Wall Street. We clearly could come to the table and dissect a company like Centel. Morgan Stanley might say, "Here's Centel, they've got 350,000 subscribers, you ought to be a buyer." We could look at Centel, carve it into geographic pieces, or market pieces and say these would be perfect for this company, these would be perfect for that company, and maximize the opportunity to be able to bring dollars to the table for the sellers.
KELLER: And you threw your own due diligence team in there also which is something the major brokerage houses couldn't do.
SAEMAN: We had an ability to send a team of people to look at the market. Not to have the world's greatest expertise, you can never do that in a brokerage deal-making environment, but we had a working knowledge of what the business was about. We could make some judgements as to what the opportunities were and present a case that our counterparts on Wall Street weren't in a position to do because they didn't know how to begin. One of the classic illustrations is when Westinghouse sold, if I remember correctly, Goldman Sachs was the investment banker. Dan Ritchie, God bless him, I remember him calling and saying "I made the best pitch I can. I know you guys are the right guys to have done this, but Westinghouse board decided because of relationships, this is going to be done through Goldman Sachs." So we looked at what was happening and thought how can we play a role? Maybe we can get in and form a consortium with some people. So we got in with TCI and Comcast. We brought a couple of other people into the group later. Gus Hauser came in to buy some of the systems and so did Leonard Tow. The intelligence that had been put together was that these subscribers were worth $1,050 each. So as we started to break up the pieces of it, it was unbelievable because here's a system in San Marino, California, a brand new state of the art system that doesn't have any subs. That's worth nothing. Franchises in the Minneapolis, St. Paul area that Gus Hauser ended up buying, along with a number of systems that were already built, all of that was worth 1,050 times the number of subscribers. You don't have to be a Rhodes Scholar to know that that wasn't the way to value the company. But that's the way it went down. Some people made a lot of money off of that transaction. In my mind, Westinghouse lost a lot of money on that transaction because they felt they needed to engage a major Wall Street firm to represent them.
KELLER: You may have had this discussion with Chancellor Ritchie but why did Westinghouse want out of the business at that point?
SAEMAN: I don't remember the conversations at the time. It was probably a corporate decision that said cable is not going to be a major area of investment interest for our company. It's not some place we want to be for the long haul.
KELLER: GE was in at one time, they pulled out. I can't get a handle on it, as to why these major companies were getting out right around that time.
SAEMAN: Everybody has a different reason. You can look at it in one sense Jim, and say why would a company like GE be in the business. They seemed to have the availability of capital to be a factor in the industry, but chose not be a factor. Why? They just didn't see where the business was going or had other business they liked better. Other companies that made early entries and got out did it for different and varying reasons. Some companies stayed in and I guess it's just a matter of whether or not you develop a feel for what you're involved in. There's no magic to it. I know now, operating a diversity of businesses out of Medallion today, when you do own a lot of different businesses, if they aren't synergistic to each other, it's pretty easy to have an offer come across the desk and say "He wants it worse than I do, I'll let them have it." When you're a focused company, like Bill Daniels was, cable is your business and you're always going to be in it. You might be buying, selling, trading, but you're always going to be in that business. That's a core value that a Daniels Company had. You're always going to own some assets. Other people look at it and thought the time has come, subs are a thousand a piece, they're never going to go above that. It must be time to get out. I don't know how often it may have been strategic, how often it might have had to do with the redeployment of assets. Many times, it was phone companies or broadcasters forced to divest, so that created a fair amount of transactional activity in the industry. Some of the companies, I remember Charley Theriot (Chronicle Publishing), wonderful guy that he was, single handedly fought the franchise amortization tax case to secure the deductibility of the franchise for tax purposes. Charley would call and say "John, I've got $3 million and I need to buy a system and I need to do it before the end of the year." It was a private company. He didn't want to distribute cash and didn't want to be taxed on excess accumulated earnings. Whenever Charley had money, he bought a cable system. After he died, other people assumed the management of the company through his son and then independent from that, got out of the cable business. My guess is if Charley were alive today, he'd have a much bigger cable company than he had at the time, because he loved the business and he understood the business.
Others, like the Tribune Company, sometimes in sometimes out. They would sit idle for a couple years, then you could hit their hot button and they would buy something else. I remember taking Doug Dittrick to them in the early '80s. They had approached me and said "We'd like you to come to work for us and put us into the cable business in a big way." I said, "I'm not the guy to do that." I knew at the time that Doug was looking for a way to expand, so I said "I've got a guy that I think will be perfect for you." I introduced Doug and his cable systems to Tribune and they created a joint venture. However, they didn't have much patience and it wasn't too long after that they decided they wanted to exit the business and they sold all their systems.
KELLER: Time, Inc. was the same way. They were in and out for a long time before they finally decided they wanted to stay in.
SAEMAN: There were times when Time wanted to sell and couldn't find a buyer, and ended up staying in, and it's a major driving force of their business. Very important portion of their business today.
KELLER: John put on your "thinking in the future cap" right now. There are some people who are still saying that there are going to remain a handful of companies in this telecommunications business, because I think we're beyond the term cable anymore. In your best estimation at this point, who do you think the surviving handful of companies will be come 2020, 2025?
SAEMAN: If you and I knew the answer to that, we could probably make a lot of money Jim. I guess the best forecaster for the future is to look at a map of what seems to be happening today. While things can change dramatically, I think we've seen over the period of time that this has been an industry where telephone companies wanted to play a role. It becomes more and more obvious as every day goes by that there are offensive and defensive reasons associated with that. Back in the middle '80s, we started an effort at Daniels through the brokerage division to educate the RBOCs on the cable business, and out of that education process, we were able to develop what I think were a number of strong relationships through people like Sam Ginn who was running PacTel at that time, and Jack McAllister and Dick McCormick who were good friends of mine and running US West. Now Sam runs AirTouch Cellular, but at the time, he was the CEO of the parent. Sam ended up doing a deal in Chicago with Bob Hughes and Prime Cable.
We left off I was looking into the future to the fact that the telephone companies had early on staked an interest in the cable business for the right reasons and that somewhere in the early, mid '80s we started dealing with the RBOCs to try to forge some relationships and introduce them to the cable industry people to see how we might be able to do some things, "out of market" with them. They had restrictions in market.
KELLER: The term RBOC, define it.
SAEMAN: Regional Bell Operating Companies. Clearly, within market, we could do things like billing and maintenance and plant leasing and things of that kind. Out of market, they could own cable systems, and be regular players. So we started to do a lot of work with all of the RBOCs back in that time frame and it was led by Brian Deevy and Phil Hogue. It paid a lot of dividends. I had the early relationships with Jack McCallister, and when Jack retired Dick McCormick came in and a lot of the things that were laid on the table as areas for them to look at and pursue, ended up being pursued.
So, back to the main question, Who are going to be the players. I think that the players are going to be hybrid type companies. I think if in fact AT&T and TCI form the conglomerate that they are talking about forming it's hard to imagine that that entity wouldn't be around in the year 2020. What it would look like in 2020 I don't know, but the entity clearly with that base core of assets is going to be around in some form. And I think my guess is that logic would tell you that there would be other players that are going to be natural looking, that will be around. That will be combinations of cable systems and operating telephone companies or other type telecommunications companies. And then there will be some real surprises.
KELLER: How about the Comcast Microsoft deal?
SAEMAN: I think Comcast Microsoft could end up doing something together. It seems that companies like that are going to be players. I don't see Comcast being only Comcast 20 years from now. Comcast is a marvelous company and extremely well run. I consider them to be the premier cable company in the business today. Expect big things from them. I think the RBOCs today are fairly narrow in what they can do for the cable industry. I think when Bell Atlantic pulled away from the TCI deal, it was a mistake for Bell Atlantic. I think they're terribly wrong. I felt like the telephone companies had a lot more to gain from being involved with cable companies than just being involved in the telephone industry. The telephone industry clearly has some advantages, customer reliability, research and development, cost of capital and customer service. From there, everything goes to the cable side in terms of advantage.
I wouldn't have a clue who's going to survive, but my guess is that there are not going to be a large number. There will be a lot of companies just because there are a lot of telephone companies today. If you look around the country you can say you've got the RBOCs and GTE. Then there are seven or eight hundred independent telephone companies still in the country today. My guess is that 20 years from now we will have a cluster, a handful of major telecommunications players that are entertainment/ telephony/data transfer business, and you will have a bunch of little companies that are going to be around as well that have decided to maintain their independence and who are not big enough or important enough assets for someone to pick up. They want to remain independent, they're going to remain independent and they may still be nothing more than a cable and entertainment company.
KELLER: You just said you don't see the synergism between cable and the "Microsofts" of the world at this point.
SAEMAN: I don't see it as clearly as I see the reasons why telephone and cable, why the telephone company should want to get hold of cable. Clearly, the Internet is an unbelievable player.
KELLER: Why do you believe that Microsoft made a billion dollar investment in a company like Comcast. It could any one of two or three companies or industries, but they chose Comcast. Why would they make that kind of investment in the cable industry?
SAEMAN: Well, first of all they have the money. They have lots of it. Microsoft is sitting on $8 billion, and they spent $1 billion. Secondly, I think they were looking for ways to insure that they had technology that would become part of the platform. The sacred black box. Making an investment in the industry was a way to become part of the inner club, and maybe enhance their opportunities to get that done. Third, I suppose if you look at the cable business from a historical perspective, you could look at a company like Comcast or TCI and see, relative to cash flow multiples, these are great opportunities to buy today, even if what you did is just make an investment and sell it later on. It probably can't go too wrong making a billion dollar investment in Comcast. Comcast is a first class company. They are nicely diversified. They're extremely well managed. They're very professional. And, I think at the point of entry, given their size, they could look at Comcast or Chuck Dolan's company or Cox as logical places to put a billion dollars and have a say about cable. Tougher for them to do that with Malone at TCI, even though Malone at the time could have really used a billion dollar investment. There may have been negotiations that just never went anywhere, and negotiations with Brian Roberts did go someplace.
KELLER: When we wrap this up, I'll tell you a little story, I want to put it on the record. One thing we skipped over and that was your year as chairman of the NCTA, '82-'83 and you were on the board a number of years prior to and after that. What do you consider your major achievements as a board member and as chairman of NCTA?
SAEMAN: Well, I think the major achievement would truly have nothing to do with my individual effort, but with the effort of a lot of people as the deregulation bill was signed. That happened in 1983. It happened while we were at the convention. Clearly that was a milestone effort and activity on behalf of the cable industry. It's a shame that couldn't have stayed in place, and we all have reasons as to why we think it didn't. I think that clearly was the most significant development. The difficult thing about NCTA was the number of different publics that were at the table and that were feeding out of the industry that had to be dealt with and legitimately so. The needs of the programming side of the business, the needs of the manufacturing side. Their representation on the board, the little operators, the independent operators, the big MSOs, keeping order so they didn't get dominated to a point where nobody mattered except TCI and ATC. I credit Tom Wheeler in large part for that deregulation effort. Tom came in with a strategic fix for NCTA that said the biggest problem this industry has is this labyrinth of regulations that it has to work its way through and why is this industry so saddled with all of that. How could we go about doing something about it? I remember a presentation being made to the board by Tom and I think Jim Mooney was there as Executive Vice President at the time as well. The strategy that we ought to approve the fulfillment and completion of which would be the deregulation of the cable industry. They said, "If you don't know where you're going, you're going to have a hard time getting there." Tom clearly laid out for the board a well thought out and well rehearsed strategy. For the industry to take a position, that would move us toward deregulation.
KELLER: Do you remember some of the major points of that path?
SAEMAN: In terms of its time or component parts?
KELLER: Component parts.
SAEMAN: A great deal of recollection. Significant part was subscriber rates. Not being able to have franchise authorities telling us what we could do and what we couldn't do in terms of charging rates. On the give up side, it was clearly that we were going to have to provide some things in exchange, like the local origination channels and public access.
KELLER: You had a relatively sophisticated board too, who understood the meaning of compromise at that level.
SAEMAN: Absolutely. The board was strong. The executive committee was strong, and certain people were on the executive committee just because of the size of their companies obviously. We had a couple of big players who weren't at the table. As I recall, major players like Glenn Jones, Alan Gerry, Leonard Tow and Chuck Dolan were not members of NCTA. I was able to help convince two of them to join NCTA during my term.
KELLER: They weren't players because they disagreed.
SAEMAN: Weren't in the industry association. Had chosen not to be members.
KELLER: I knew Tow had held out for a long time, I didn't know that Dolan had held out that long.
SAEMAN: Those were interesting times. I preceded that for a year as chairman of C-SPAN, which was great fun also. It was so totally different. NCTA was big and powerful and had plenty of financial resources, strong leadership and depth of personnel, lobbyists, and everything that went with it. I succeeded Bobby Rosencrans at C-SPAN. Bobby had done a marvelous job. C-SPAN was quite small, but with a grand vision and great leadership from Brian Lamb. It wasn't much bigger when I left after a year. The kinds of challenges that you dealt with at one vs. the other were so unbelievably different. It was great, great fun and it was very rewarding.
KELLER: Go into that in a little more depth, will you please John?
SAEMAN: I got involved in C-SPAN at the behest of Brian Lamb. We were one of the early contributors. Bobby really put the thing on Main Street by writing the first check for $25,000 and saying let's get the industry behind this. As a result Bobby is Chairman Emeritus of C-SPAN. Bobby served for a number of years as the chairman, and then wanted to resign. Brian asked me to succeed him, but I could only do it for a year because I was vice chairman of NCTA and I was likely to be elected to chairman the following year. I took the Chairman's role at C-SPAN for a little over one year. When I got started there, we were over in the head-end of the Arlington, Virginia cable system, which John Evans and his investor group owned. We had three employees at the time, but great ambitions. Congressmen were coming across the bridge at the high time of traffic, to be on the call in show, 5:00 in the afternoon, Eastern Time. We remember momentous occasions. A momentous occasion for us was saying, "Brian, you've got to get out of Arlington, Virginia and move C-SPAN into Washington, D.C. We're dear to the Congress of the United States, you've got to get across the street from them. Bob Magness used to beat us up pretty good, urging us to run this thing as tight as possible. He was a voice leading the efforts to keep C-SPAN's costs down. Brian knew, as I did, that we had to make a leap of faith and do the right thing. So, we went over and took space at 440 N. Capitol, which is right across the street from the Capitol, looks right on to the Capitol. I remember Brian reporting to me on the phone, "I've got a deal, need approval on it. We've got 2,500 feet. I said, "Brian, is that all we can get?" He said "What do you mean, is that all we can get?' I said "Can you get more?" and he said "Well, I can get twice as much, but what would we do with it?" I said, "We'd figure that out." So we got twice as much, and now they've got over 30,000 square feet. Still in the same location.
KELLER: What year did they wire the House chamber and get the permission to do so. Was that after you were there?
SAEMAN: No, no. The House chamber was wired in 1979. That was when Bobby kicked in and said "We've got to get behind this effort, we need to raise this money." This is the 20th Anniversary for C-SPAN. I can't remember the date their first coverage was in the House. Sometime 20 years ago. By the time I got there, our initiatives were focused on opening up the Senate chamber for coverage in a separate channel. We had C-SPAN I, were working on C-SPAN 2 for the Senate, and were trying to open up the Supreme Court. Those were initiatives that we were taking at that point.
KELLER: Are you still on the board?
SAEMAN: All former chairmen are on the board at C-SPAN, so to that extent, technically, yes. Practically speaking, no.
KELLER: What kind of a budget do they operate with today?
SAEMAN: I think, and this is really a guess, I think it's like $25 million. One of the interesting things, a year and a half ago I was in Washington and I called Brian and we went to dinner, and Brian said "You'll really get a kick out of this SAEMAN:, I'll show you how far we've come." He said, "We're looking at buying a radio station in the Washington market." "Radio station, that's interesting, what are you going to do?" He said "We're going to create a radio feed and put it out into the Washington market for C-SPAN. And I said what does it cost you to buy a radio station? He said "Well, that's the problem. They're quite expensive. I think it's going to cost us over 10 million bucks just to buy the station. And he said quite honestly, I don't think the board will ever approve it. I said, "How would you finance it?" and he said "This too you wouldn't believe. Because when you were here we agonized over the cents per subscriber per month and getting people to pay and getting people to carry, and C-SPAN was now sitting on $15 million in cash reserves." The Board's logic was we don't want to cut the fees, because the fees are already very nominal to carry C-SPAN. So what can we do to enhance what we do? Well, they ended up buying the radio station. They now have a C-SPAN radio feed in Washington. I was back there a couple weeks ago, and C-SPAN had a board meeting going on at the same time as The Cable Center and NCTA. Brian had put a package in every room for people in attendance, an AM-FM radio with a headset that was tuned to the C-SPAN radio feed, so I was able to listen to the radio feed. It was great fun, because it was such a grass roots, entrepreneurial, good effort to be involved in for the cable industry. You felt good about it, because it was contributing to the cable industry in such a positive way as against its cost, given what the industry was going through and the regulatory environment, harassment on all kinds of issues -copyright, retransmission, and all of the rest of it, to have something like that, that befriended us to the House of Representatives.
KELLER: Couldn't have a better lobbying effort.
SAEMAN: And it was so inexpensive and everybody could participate in it.
KELLER: All the comments like watching paint dry and grass grow, and it's true that there are an incredible number of C-SPAN junkies out there that literally make a life out of watching and observing C-SPAN.
SAEMAN: Even if they never had one viewer, the fact that these people in Congress felt that they were out there would be worth an investment in it.
KELLER: So Brian, in my mind, for having come up with the idea, is just one great American. I think what Brian Lamb has done is incredible. Very dedicated, humble, wonderful person, what he's done for the industry and the American public. His contribution to the industry is exemplary. Wonderful effort that the cable industry can be very proud of. Of course, Brian was given the blessing to work on this while in the employ of Bob Titsch of Cablevision Magazine.
SAEMAN: Clearly, Bobby Rosencrans standing up and saying "We've got to do this and here's my check for $25,000, let's get going and make it happen. It was a defining moment to have Bobby come forth.
KELLER: Ed Allen played a big part in it too.
SAEMAN: Ed was a very, very strong advocate of C-SPAN. Served as chairman and he was an outstanding chairman. Ed set a wonderful example in that 100% of his cable systems carried C-SPAN 1 and C-SPAN 2. He did a great job and was a wonderful asset to C-SPAN.
KELLER: I know he was always pounding on doors trying to get contributions and carriage.
SAEMAN: He was very forceful, that's just the kind of guy Ed was. Whether it was in his chairmanship of NCTA or chairmanship of C-SPAN, Ed was a force to deal with. Not a shoddy person. Knew what he wanted and knew how he was going to get there and wasn't afraid to ask for the order. He's doing pretty well. I talked to him about a month ago. I tried to go by the hospital and see him when I was out in San Diego, a month or so ago to see Bill. Bill advised me I couldn't see him because he was in intensive care, and he didn't think he was going to come out. He called two days later and said, "Here's Ed's phone number and he's home." I called him – he was short of breath, having problems, but at least he was home from the hospital.
KELLER: That's great. Glad to hear that.
SAEMAN: He was a wonderful asset, and Jack Frazee was a wonderful asset to C-SPAN.
KELLER: We had a lot of advocates of it in the House of Representatives in the early days too. Took a little longer to get into the Senate.
SAEMAN: We've never gotten into the Supreme Court. I'm not so sure that's wrong.
KELLER: I'm not either. They work behind closed doors anyhow, so I don't know what they'd really show. Couldn't show their deliberations.
SAEMAN: I think people having seen the O.J. Simpson trial probably don't feel they need to see the inner workings of the Supreme Court. Both of those experiences for me were wonderful, very rewarding experiences. They were demanding at the time for me to be involved in, because of all the other things we were doing at Daniels, like the acquisition program for the ACT series, brokerage activities, etc. but as is always the case, they provide economic opportunity too, because the friendships you create and the relationships that you build open doors that otherwise wouldn't be opened to you, so all in all a) you need to do it, an b) you probably get more out of it than you put in.
KELLER: Always the case.
SAEMAN: Great experiences that I'm pleased to have been a part of.
KELLER: We had talked earlier about your most memorable deals. How about a few words on the most memorable person?
SAEMAN: There is no person more memorable than Bill Daniels. From the first day I met him in 1964, I was taken by him. He is an incredible person and I have learned so much from him. Bill has a very special talent with people. You can be in a room full of people, but if you are in conversation with Bill, he makes you feel like the most important person in the room.
Bill was always more than fair, quick to hand out praise and never said, "I told you so". I can't imagine anyone better to work with than Bill.
KELLER: Where does John SAEMAN: go now? He's still a young man, still has many things to do. Where does he go from here?
SAEMAN: I'm having an awful lot of fun doing what we're doing. Medallion Enterprises, LLC is an asset of my wife's and mine. Basically we invest funds that we were fortunate enough to have made in our days in the cable business. We've done that in a fairly diversified way. We still do quite a few things in the telecommunications industry, but we also do a lot in real estate. We have a number of venture capital investments as well. Start up of small companies. We have a small aviation company that we bought a year ago out on Long Island. Service business. So, we're doing a lot of different things. I've got three colleagues that assist me, each of whom are called partners in our scheme of things. I'm not so young any more, but feel young and my love has always been deals and people, and there's no greater asset to have for doing that than money. The combination of being able to take the good fortune that I received from being in the industry; being able to continue; and, being able to open up some new avenues is the lifestyle I expect to have until I can't do it anymore. I don't see myself ever saying I don't want to do anything anymore. I've worked hard all my life and it's not time to quit now.
A large part of what we're motivated by today is charity. A large part of that is directed to the church. Philanthropy involved in the local church, the Archdiocese of Denver, the Vatican, Catholic education, schools I went to back in the Midwest, inner city schools here, and a good percentage of my efforts is dedicated to those kind of causes, both from a time standpoint and from a monetary standpoint. I find that to be very rewarding. I had probably the world's greatest mentor in that respect. In fact I have two of them. My Dad was a wonderful mentor, but he didn't have any money. What little he had, he was very generous with. And Bill Daniels, who at times didn't have any money, but was still a philanthropist. Or has had a lot of it and has been a major philanthropist. Always a philanthropist. So, I've been able to observe Bill in action over the years. One of the many great things that I learned from Bill was certainly philanthropy. I expect to stay busy, expect to continue to be involved. I like to lead a quieter life today. I want to go out and share something, be here, do my thing. If somebody knows who I am that's OK, if they don't, that's good too.
KELLER: John, I think taking up three hours of your time right now, it's gone very, very fast. As a tag on this thing, I want to say that we have done this in the offices of Medallion Enterprises in Denver, Colorado, on July 15, 1998. The interviewer was Jim Keller. Thanks very much John.
SAEMAN: Thank you, great fun.