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Jeff Marcus

Jeff Marcus 2019

Interview Date: August 6, 2019
Interview Location: Denver, Colorado USA
Interviewer: Stewart Schley
Collection: Hauser Collection

Note: The Cable Center Website is made possible by a gift from Paul G. Allen, Jeffrey A. Marcus and Marcus Cable.

Stewart Schley: Greetings, and welcome to this episode or edition of the Hauser Oral History Series brought to you by the Cable Center. It is August of 2019, if I'm not incorrect. I'm Stewart Schley and we’re here in Denver with Jeff Marcus. You're not doing a doubletake. There is actually a predecessor interview with Jeff that was recorded in 2001, after the exit of some of the cable companies that you had formed which were some of the prominent companies of that era. Since then, you have hardly been inactive. You were an active investment strategist. You have been active on the national political scene and have a lot to say, I think, about the state of the industry and kind of where we've been since those days.

So Jeff, welcome and thanks for being with us.

Jeff Marcus: Thank you for taking the time to do this. I’m really very pleased to be here. When I was thinking about the fact that it was 2001, when we last did this interview, and what has happened since 2001, it's really been a remarkable 17 years. When I look back at 2001, I'm sure I had more hair and it was darker. But I also at that point didn’t have four grandchildren. That’s something that has been a major, major accomplishment in my life. And I also married a wonderful woman by the name of Nicola, Nicola Marcus. And she is the most beautiful grandmother you could imagine.

Jeff Marcus

Schley: It's funny. I watched the earlier interview recently and you made reference to, at the time, your son, I guess at one point was a big baseball person.

Marcus: Yes.

Schley: Could you talk about your association with the Texas Rangers and how that came about just for fun?

Marcus: Well, it was right after I moved to Dallas in 1987 that I met George W. Bush. What I didn’t know is right after we met, that he had been asked to put together a group to try and buy the Texas Rangers because there was another group from Florida that was wanting to buy the Rangers and move them to Florida. And they asked me to be a part of that group. So in 1988, I think, I agreed to do that. I think we closed in 1989 and bought the Texas Rangers and it was a great run. We owned it for nine years and we won the AL West during that time. My son was nine years old at the time.

Schley: Good baseball age.

Marcus: Boy, he had a great time. This was a great lifestyle investment. He and former President Bush would sit in the front row and they would eat sunflower seeds and talk baseball and my son knew a lot more than I did. So it was really a lot of fun.

Schley: I appreciate you sharing this story. And I did want to reach back in the memory vault for one more question at risk of double-dipping in to the other interview. You literally started your career, Jeff, selling cable door-to-door.

Marcus: That’s right.

Schley: Just take us back to where you were and how that kind of felt or what happened.

Marcus: Actually, I was working my way through school and I had a number of jobs. I went to the University of California, Berkeley. And I was—in the summer of 1967 I was driving a garbage truck and I would get up and be at the yard at five in the morning and I'd work until two in the afternoon. I was a very conscientious garbage man. Even today, I have a heart for the garbage men of the world. But my roommate was selling cable TV door-to-door. And he would go to work at five o’clock in the afternoon, come home at nine, and he was making twice as much as I was making. It didn’t take me long to figure out he had a better job. So I applied for the job and I got a job selling cable door-to-door, and I stayed with it in my senior year of college. When I graduated, I actually got a job working in Seattle, Washington, running a cable television marketing program and I also had to go over to Wenatchee, Washington, to run the program there. And I just stayed with it. I can't say I had the great vision that cable was going to become what it is today.

Schley: And your life.

Marcus: We were selling antenna service. Then it was called CATV. Community Antenna Television. And that’s what it provided. There was no satellite, there were no distant signals. That had been shut down by the FCC. So we were just selling reception service to people who otherwise couldn’t have it.

Schley: It’s so poetic, though. Because do you ever allow yourself to think, OK, if I hadn’t taken that job in the late Sixties selling cable—your life, presumably, would be very different.

Marcus: Well, I'd still be in garbage, probably.

Schley: I don’t think that’s the case. It's a great story and so your heritage and involvement with the development of the industry through all of its incarnations is pretty interesting.

I want to talk about the last company you had formed and ultimately exited, which was Marcus Cable?

Marcus: Marcus Cable.

Schley: Just take us up to when that company was sold. How big were you, and where were you guys?

Marcus: At the time, we served about 1,250,000 subscribers, which in those days was pretty big. And we were the ninth largest MSO, but we were the largest privately held company. And it was a company we had built really from scratch, starting in 1989-1990. I had seven private equity partners that funded this growth and we did it all through acquisitions. We ended up selling to Paul Allen. He was a great buyer because he kept the company pretty much intact. He then bought Charter Communications and merged Marcus Cable under Charter. It was renamed Charter. His company was then Charter Communications. It was so ironic because so many years later of course we at Crestview got involved in that. And I know we’ll talk about that in a few minutes.

Schley: It makes for such a great jumping off point because maybe you could talk about—that was a transformative time and Paul’s vision was for a very different-looking industry, I think, than previously had existed. Can you talk about that era of cable and what you saw forthcoming when you got out of Marcus Cable?

Marcus: When you look back on your life and you look back on your career, and the choices you made, and the doors you went through and the ones you didn’t go through, that day in 1998 when I sold Marcus Cable, when we sold Marcus Cable, it was really a fateful day. Because I had spent my entire career in the cable television business, and I had built up this company to be an important company in the industry. I guess if I look back on it today, I would say, I wish I hadn’t sold it. Because where cable was then and where it is today, it hasn’t missed a beat. But it's gone through many capital cycles, it's gone through many ownership cycles, with seven private equity firms as partners. Private equity companies, as I well know, look for an exit and for a realization and return on their investment. So when I sold Marcus Cable, it was really with a great deal of regret. But you don’t really think about it at the time. You put one foot in front of the other and you go forward and I had an opportunity to continue to lead Marcus Cable. Paul Allen wanted me to stay and be the chairman and the CEO of what he envisioned to be the wired world. And to make acquisitions and it was something that interested me, but I realized that I wouldn’t be working with Paul, for Paul. There were some intermediaries involved there. That didn’t appeal to me, and I had an interesting opportunity to become the CEO of a large public radio company and so I chose to do that. That sort of sent me off on a different path.

Schley: Could you see at that point, around the time of that transaction, the Internet high-speed broadband category coming into focus?

Marcus: That was the next capital cycle that was facing the cable industry in 1998. Because cable, phone and broadband were just becoming on the scene. And it would involve a big upgrade of the systems, a big upgrade to finance this new technology and my private equity partners I knew weren’t going to want to fund that. So that was one of the reasons that we chose that moment to sell.

But when you look at Paul Allen’s vision of the wired world, he really was a visionary guy. And by wired world, I think what he had in mind—we had several conversations about this—was that we would be interconnected via the Internet and that cable could be the star player in that. And I think that what has happened in terms of broadband now being the most important product that cable has to offer. I think this was probably in the back of Paul’s mind. I don’t think that anybody at the time could see how it evolved exactly, but a wired world company is what he had in mind. I think that’s in essence what’s happened.

Schley: I wanted to ask you—I was just thinking about this as a prelude to this interview. In your career as the chief executive officer of former cable companies, were there ever moments when you had a crisis of faith about the industry and the economics surrounding it, or was the characteristic such that this was a very predictable, understandable, kind of business model?

Marcus: Well, there have been so many existential threats to the cable industry over the years. When I first got involved, it was the telephone companies and the broadcasters early on back in the late Sixties. And there was always going to be something that put the cable industry out of business.

Schley: I remember.

Marcus: And yet, the cable industry always was able to come up with something more to sell and another reason to have cable. That old tagline, “there’s more to see on cable TV,” always was true. And even today, we can talk about the existential threats to cable and some people will say they’ve never been greater, and I would say I'm still a bull on cable. I was when I started knocking on doors in 1967.

Schley: Jeff, what is the latest existential threat du jour? I mean, what's in the market today that’s—?

Marcus: I think it's probably 5G. And what 5G is going to do to the necessity they have of fiber and hybrid fiber coax.

Schley: Literally a line snaking into the back of your…but you see the industry able to thrive in the face of a 5G threat.

Marcus: As an investor still in cable, and as the chairman of Wide Open West, we've done a lot of work looking at 5G. And we've had a lot of people come talk to us, technical people. I think that 5G is like so many emerging technologies. I think it has been over-hyped and I think that the standards that have been adopted here in the United States are not going to enable the 5G providers to really compete in a way that it's going to be a major threat to cable.

Schley: It's interesting because cable guys—you're an archetypal cable guy—you understand, I think, the capital demands and the physical labor demands of building a cable system are intense. When I see what's happening with 5G, it makes me think back a little bit to the—you know, you’ve got to put a lot of antennas in a lot of places to make this infrastructure work.

Marcus: And it doesn’t go through buildings very well and it doesn’t go through other obstacles very well. It's very expensive. I think that the day of reckoning for the 5G people may be coming. We’ll see. But there is certainly a lot of enthusiasm and hype about it, but it's not something that I see as the existential threat that some others might see.

You look at the people that are out there selling broadband 1 gigabit, broadband such as Google Fiber, etc. And Google, with all the money in the world, all the technical expertise, they really haven’t been able to execute very well on that vision. Because it really is hard to go door-to-door-to-door to hook people up and service people and bill them. And have customer service available 24 hours a day. It's not as easy as it looks.

Schley: People used to criticize your industry: “Well, it's a monopoly industry.” I don’t know if that word was ever really the right word, but the truth is, the economics really didn’t support multiple players usually in a market, right? Because of what you just articulated.

Marcus: Well, that’s right. It's hard. That’s the way it is. The day-to-day running of a cable company, there's a thousand things to do—not that that’s not true for every business, but you have a customer-facing business that has a very, very precise technology that has to work. And you’ve got to have people that come out, that can talk to the customers in a way that they're talking through how to operate it. It's very complicated.

We all remember the days of turn on your television, click through the channels. No more.

Schley: You mentioned a reference to Wide Open West, colloquially known as WOW!, I guess that’s what we call it. That’s one of many companies in which Crestview has investments, either active or has exited from investments. Can you just run through what the intent and purpose of what Crestview is and some of your media-centered investments?

Marcus: Well, Crestview is a middle market private equity company. And I joined Crestview right after its formation in 2004. It started in April of ’04 and the founders came to me and they wanted me to run the media vertical. And I agreed to do that. The company is headquartered in New York. At the time, I was living in Dallas. I spent time in New York and shortly after that, I moved to Palm Beach, Florida. And in the media side of Crestview, we did a number of investments in the cable industry. Our first was to buy, along with another private equity company, the cable system serving San Juan, Puerto Rico, and adjoining communities. We owned that from 2005 for, gosh, I can't remember how many years, but we ultimately sold that to Liberty. That was an interesting investment in that I found Puerto Rico to be a very difficult place in which to operate. All the things that we learned in terms of customer service here in the mainland—it's hard to apply them in Puerto Rico. And even though Puerto Rico is a commonwealth of the United States and operates under US law, and we think of it very much as we can just go there and expect the same thing, it's very different and a very different culture. I would say it was an OK investment for Crestview. It wasn’t a great investment for Liberty. It's been a very difficult investment compounded by what happened with the hurricane.

Schley: Right. And then you went on, though, to invest in other cable companies.

Marcus: We did. And I believe our next investment was Charter.

Schley: A familiar company.

Marcus: A familiar company. At the time, Marcus Cable comprised 20% of Charter. From 1998, Paul Allen went through, or his management team went through a number of very expensive acquisitions and they built the company that was quite large, but also had a huge amount of debt and a very complex capital structure. We looked at that as an opportunity because one of the things I thought about, with respect to Charter, was that here you have a man who was dedicated to cable and to the proposition of what cable is and what it can be.

Schley: Mr. Allen, Paul Allen.

Marcus: Paul Allen. And even though the company was very troubled from a debt to EBITDA perspective, he was the one person that could actually backstop this. I didn’t believe that he would ever let it go into default. So we found a place in the capital structure where we could invest, and feel comfortable that if that thesis was wrong, that in fact the company were to enter a restructuring, this particular tranche would become the fulcrum security. And that was our least probable scenario. But it turned out that, I think it was in 2008, Paul had some sort of a health scare and I think he had had enough of this investment, although he had put something like $7 billion of his own money. And he decided to let it go through a restructuring. I'll never forget when we learned that, and the bonds that we had bought had whatever the price was, were virtually worthless. Everybody looked at me and said, “OK, Jeff, what do we do now?”

Schley: What was the answer? What did you do?

Marcus: Well, we actually participated in the restructuring. There were two other major holders of this tranche of bonds that we worked together with on the creditors’ committee. Because of our knowledge of cable, and experience in cable, we took an outsized role in the creditors’ committee. And when all was said and done, we ended up owning—we were the third largest holder of Charter Communications when it emerged. This is the interesting thing about being in the private equity business. Because we make these investments and then five or six or seven years later, we need to harvest them and return the money to the investors so we can raise the next fund. So that’s sort of the oxygen of private equity. It's very different from the long-term ownership vision of so many of the people in the cable television business. And the people that have done so well in the cable television business.

Schley: Which could be generational.

Marcus: Exactly, exactly. So once the stock started to move, my partners came to me and said, “Boy, we've done so well on this investment, we not only have our money back, we have multiples of our money back, so we need to sell and move on to the next fund.” I said, “Fellows: we’re just getting started here.” We were recruiting Tom Rutledge to come in and be the CEO and I would say, “The best is yet to come.”

I'm giving you all public information here. We owned at the time, we at Crestview owned 11 million shares of Charter, and when the stock was $71, we sold a million shares. Then when the lord of Liberty came in, we sold some stock to them. Again, all public information. That was just great because not only did we have Tom Rutledge, but now we have John Malone and Liberty and all that. Hey, they all represent—Malone and I go all the way back to the late Sixties. And this was really going to be fun. The fun’s really going to start now. And my partners wanted to sell. Because we were raising our next fund.

So our next fund was—we raised Fund Three, which was like $3.3 billion.

Schley: Earmarked for media or—?

Marcus: No, for the entire four strategies of Crestview. Had we kept that 11 million shares—

Schley: Here’s one of these stories.

Marcus: Think about it. The stock is $400 today. Do the math. That would be over $4 billion. What are you going to do?

Schley: You all along that odyssey—it sounds like your fundamental confidence in the business of cable never was questioned, right? You saw value.

Marcus: The fellows behind Crestview were out of Goldman Sachs. And the first private equity investor in Marcus Cable was Goldman Sachs. And this was before they had a fund. So all the partners chipped in to make the investment in Marcus Cable. So there is not a former partner of Goldman Sachs of my generation that doesn’t remember the Marcus Cable investment because it was a very good investment.

Schley: They did well on that.

Marcus: And so when the former Goldman guys were forming this private equity company, they wanted to have a media vertical and they wanted to get it all in cable. That’s when they came to me.

Schley: In the media vertical itself, what do you look for? What are the fundamental attractions for a particular investment versus another? Is it the management team? Is it the moment in the capital markets? What do you look for?

Marcus: First of all, we would look for a company that is –with the addition of capital and with the addition of coaching and the Crestview magic (we used to call it), we could do better. We could expand what we could buy and build. So we thought that given the history of the Puerto Rico system, that we could bring our expertise to bear, we could manage it better, we could expand it.

Schley: You weren’t the passive, “here’s some money, go do your thing.”

Marcus: No, no, no. We would take a very active role, and hence my being chairman of WOW!. We have two other people out of Crestview. I'm no longer with Crestview. I retired from Crestview. But two of the Crestview partners are also on the board of WOW! So yes, we will take a very active position. Not always, though. When we bought the bonds at Charter, we were passive holders of the bonds. We just felt that those bonds would appreciate as the company did better, so we bought them at a discount and if we could sell them at par, we would have done very well. But we also protected our downside by knowing that if the company ever did go through restructuring, we strongly felt that would be the fulcrum security, meaning that the security that would own the equity.

Schley: It's interesting because the cable business primarily has been a subscription supported business. You made an interesting pivot in your career into the radio business. And I'm just curious if you could talk about what was the attraction and what was the risk you saw in radio at the time?

Marcus: At the time—this was back in 1999—and two years before that, the laws had changed with respect to the radio business. And it used to be that radio ownership was significantly limited in markets; you could only own so many, there was a lot of cross-ownership restrictions. In 1997, there was a deregulation of radio so people were rolling up radio stations, and it felt a lot like the early days of cable and cable consolidation. This was before Internet radio, before Pandora, before Spotify, before any of that. And I'll tell you an interesting story about that in a moment. But this was a chance to sort of do what I had done at Marcus Communications and then Marcus Cable in terms of the buy and build. Indeed, we started off with two radio stations in this company, which was called Chancellor Media, later, AM/FM. When we sold the Clear Channel, we had 479 radio stations. So it was a huge home run for the private equity company that was behind it, Hicks Muse. And it was a very interesting experience for me. Obviously, I was not a radio person, but I was a person that understood how to run a business, how to build a business, how to finance a business. And it was new for me to run a publicly-owned company, publicly traded company, although Marcus Cable had public funds. So there are a lot of similarities.

Schley: It was interesting because it exposed you to the vagaries of the advertiser-supported media side. This was before, as you said, subscription streaming came into the fore. So what was that like? What was that reckoning like?

Marcus: Well, we actually sold to Clear Channel before that happened. But the story I wanted to tell you is I had a guy come to me one day that I kind of knew in Dallas. And he came in and said, “I have a great idea. I want to put all your radio stations on the Internet.” And I said, “Well, Mark, that’s a great idea. What are you going to pay us for that?” He said, “No, no, no. I'm going to let you invest in the company. You can buy a quarter of the company for $25 million.” I said, “Well, what's the revenue model?” And he said, “We’re figuring that out.”

Schley: This is early Internet…

Marcus: I said, “This is a public company so come back when you’ve got this figured out.” So he calls me back a few months later and he says, “Well, I've got some late developments. I want to come see you again.” I said, “OK.” He said, “We changed the name to broadcast.com.” I said, “That’s probably better than AudioNet. What's the revenue model?” He said, “Well, we’re getting closer.” So I said, “I'm going to give you the same answer. You want a valuation of $100 million in a company that has no revenue.” And I said, “We’re not a venture capital firm. We really can't do that.” And I said, “Mark, come back when you’ve got it figured out.” So he called me, I don’t know, seven, eight, nine months later. And he said, “Well, I've got good news.” I said, “Well, what's that?” He said, “We just sold broadcast.com to Yahoo for $7 billion.”

Schley: Oh, my gosh.

Marcus: And I said, “Mark.” Mark Cuban. “That is amazing. What's the revenue model?” He said, “We still haven’t figured it out.” Mark Cuban’s brilliance was not only in doing it, but in collaring the Yahoo stock. And if you look at Mark Cuban today, that’s how he got his start. That $25 million would have been worth how much…?

Schley: I mean, the absence of a business model was not unique to broadcast.com. And so what was your view? You sold cable door-to-door. You sort of sweated it out to make a living. Here are these guys who don’t have a discernible business model; in some cases, flipping companies and making money. It had to feel kind of off-kilter.

Marcus: Interesting enough, when I sold Marcus Cable, and we then sold Chancellor Media to Clear Channel, some of the guys said, “We’re old Marcus Cable guys and we formed a company and we were going to get involved in this whole Internet situation.” So we went out to learn as much as we can. And we went to see a fellow out in Massachusetts who had built up a collection of all these Internet companies and his stock was way up and he was doing great. And he was very nice to receive us. We flew there and he spent the afternoon with us. We had a very nice dinner. And as we were driving back to the hotel—I think there were four or five of us in the vehicle—and I looked at my friends and partners and I said, “All right guys. Do you have any idea what they were talking about?” And they said, “No.” And we weren’t very successful because we couldn’t share in that vision and we were—

Schley: I understand.

Marcus: We were all steeped in the whole model of revenue—

Schley: ARPU, Paying customers…

Marcus: That company, by the way, went bust… We’ve seen it happen again, but today it's very different and you get these startup companies and they're doing well. Now they have revenue. And now they have profits.

Schley: There's a business behind it.

I know you're not actively engaged with Crestview, but do you see interesting investments when you sort of scan the horizon and you look at the media business, which is always in a state of flux, right? What do you like right now? I mean, what's of interest? Is it online video?

Marcus: I like being retired. (laughter) I think it's really hard to find good deals today. For a number of reasons. Everything is really highly priced, number one. Number two, there is so much money that’s being thrown at deals, it's really hard to find value. And Crestview is a value shop. We don’t look for growth investments; we’re more of a value shop. So I think it's hard to find value today.

Schley: Regulation and regulatory policy has always affected and influenced the cable industry, probably maybe forever will. I don’t know, but you’ve had some exposure to and involvement at a high level in the world of politics and governance. I wonder if you could just talk about your roles and responsibilities there and sort of how you see a regulatory structure that might make sense for the communications industry going forward. Is there one? Tell me what you’ve done, first, tell me what your involvement has been with politics.

Marcus: I guess it was after the Internet company didn’t work for us, I was asked to get involved in Republican party politics on the fundraising side. So in 2001—and I was never really a big donor, I was never that involved, but I was interested. And Governor Bush of Texas, who was one of our partners in the Texas Rangers, when he ran for governor, I was off doing something else and I didn’t really raise money or get involved and didn’t have a role in the state government at all with him. But a friend of mine asked me if I would participate, and I got involved actually through the Republican Jewish Coalition and helped them in their endeavors. And I was asked to co-chair the Republican National Committee presidential gala in 2001. We raised a record amount of money. And when you raise a lot of money, then they ask you to do a lot more.

Schley: …you volunteered…

Marcus: Right. They asked me to become the head of the major giving program, the $100,000 giving program for the RNC. I did that. One day I received a call from the attorney general of the state of Texas, who was running for Senate, and he wanted to talk to me about helping him in north Texas. And I ended up helping him not only in north Texas, but throughout the country. And I became his national finance chairman. That’s John Cornyn, who today is the number two man in the Senate, the number two person in the Senate. I also helped Norm Coleman, who was running for Senate in Minnesota. So all of that—in 2002, the election of course, John Cornyn was elected senator, Norm Coleman was elected senator, we raised a lot of money for the RNC. And I got a call from the President, and I was honored to go to Washington and meet with him in the Oval Office, just the two of us. He asked me if I would be an ambassador for the United States. And that was really…

Schley: What was that like?

Marcus: That was such a high moment in my life. Here I am two generations away from the Lithuanian shtetl and I'm walking in to see the President of the United States.

Schley: Ambassadorship to?

Marcus: Well, I ultimately was appointed to become ambassador to Belgium. So you go through a process when you become an ambassador designee. Before they even announce your appointment, you go through an FBI check. And it's very, very intrusive. They did 42 interviews in Dallas and New York and Aspen, places where I spent time or lived, and that all went fine. So then once they do that, then they send your nomination to the Senate. So then the opposing party gets a crack at you. In the interim, you're going to school to learn how to be an ambassador, you're going to the Foreign Service School, you are going to see every agency that’s at post, so I had an exposure to the inner workings of the DEA and the CIA, which was fascinating. It was a really interesting year for me. Then you go in front of the Senate Foreign Relations Committee, you have a hearing, and the Democrats in this case, the opposing party, gets a crack at you and they ask you everything that possibly they could ask about. American policy towards the country where you're going, what's going on with the political situation in the country—just to try and trip you up. But also to make sure you're qualified to represent the United States.

Schley: It should be a little bit hard.

Marcus: Sure. And you're the personal representative of the President of the United States and it's a huge honor. I'll never forget I had both senators from Texas sitting there with me at the hearing and it went really well. The Senate Foreign Relations Committee sent my nomination to the full Senate unanimously that day. It's hard to think of anything happening unanimously today.

Schley: I was going to say.

Marcus: But then right before the recess in ’03, my nomination was taken up by the Senate. And there was this one senator who put a hold on my nomination. Not because he knew me, but because he was mad at the President about something. Fortunately, it happened to be a state where I knew the other senator and they were able to work it out. And I was confirmed unanimously.

Schley: I thought you were going to tell me he had a customer service issue from way-back-when with a cable guy. (laughter)

Marcus: Well, he might have. But this was August 31st of 2003, and I was going to go to post in October of 2003. I ended up having a family issue and I didn’t go. But I had the experience of a lifetime to go through that process and to learn what I learned about our Foreign Service, to meet so many wonderful men and women who serve our country and who do so just tirelessly for hours on end. It gave me such a great insight into the workings of our government.

Schley: Just talking to you gives me sort of a…

Marcus: When you asked me what would be a policy, a communications policy that would make sense for the cable industry, I really can't answer that today except to say that the partisanship has gotten so out of control in this environment. And the collegiality that existed even back in ’03, where one senator could go to another and say, “Look, I know you're doing this hold for political reasons, but this guy’s a friend of mine, he's a really good guy, he knows what he's doing, he’d be a great representative of our country. Would you find another way to protest?” And the man said to the other senator, “Fine. We can do it.”

Schley: You clearly got some Democrat votes out of the committee because it was unanimous. But you don’t see that existing anymore?

Marcus: I have friends that have been waiting for a hearing, waiting for a vote, that President Trump has nominated to be ambassador, and they can't go. And because they cannot, they cannot get through the Senate Foreign Relations Committee, let alone the Senate.

Schley: You did live through, though, the most onerous maybe piece of federal legislation. Was it the 1992 Cable Act that imposed rate regulation on the cable industry? I get my dates a little confused. But whatever, you lived through that, and that was hard, right?

Marcus: It was really hard. I remember going in front of city councils time and time and time again trying to justify a rate increase. We wouldn’t have a cable industry today if the federal government hadn’t gotten out of the way. We wouldn’t have a cable industry today if the federal government hadn’t reined in those pole owners who, early on, wanted to pay for their entire plant by having the re-arrangements and the pole rental fees paid for by the cable industry. So there's good regulation and there's bad regulation. And it depends whose ox is being gored in terms of how you see it.

Schley: Listening to you talk, talking about the appointment to the ambassador post, did you always sort of intuit that you were going to be a successful businessperson? I mean, you're a kid coming out of college and it probably would have been hard to foresee the evolution of what would be your career, but you must have brought this confidence, this quiet confidence, at least, through almost every hurdle along the way, it seems like.

Marcus: I think I didn’t know how tough it would be.

Schley: I think that’s an honest answer, but when obstacles did arise, what was your approach? Either management or leadership-wise. How did you guys get past those spots?

Marcus: I think you keep going and you try and learn from the examples of others. There were some dark days certainly, and times when you wonder—I remember going back to when I was a cable broker and I'd left—I managed two television cable systems in Minnesota, and this was in 1975. I decided to join Rick Michaels at a company called Communications Equity Associates.

Schley: CEA.

Marcus: The only problem was that Rick was—he was starting out and there was no salary and there was no income and so I cut the cord on the monthly income. And I didn’t know a whole lot about being a cable broker. I didn’t know how I was going to get any listings. I didn’t know how I was going to get any customers, but I thought OK, there's a whole bunch of guys out there that do it, so maybe I'll give it a try. And I got my first listing for a cable system in a town called Watertown, South Dakota. I had a guy that wanted to buy it. I can't recall how I even came by him, but I took him out there, and the day he wanted to go was the day my former wife and I were having a big party in our home. It was like a housewarming party. We just had moved into this house. And so I'm thinking, I've got to go to this, to Watertown, South Dakota, and I might not be able to get back, and how do I break the news.

Schley: That’s a tough sell.

Marcus: But I said, you know what? I've got to put food on the table. So I went out there and we did all the diligence of the cable system and we had dinner with the owner, and we shook hands on a deal. I remember going back to the motel—it wasn’t a hotel, it was a motel—and I laid in my bed. And I was going to make more money on that one commission than I'd ever made in a year in my life. I was just overcome. It was those kinds of moments that I remember today—this was what, 1976? It was those moments that made all of it worth it. When you overcome all the obstacles and you focus and you do this and something comes of it.

Schley: That’s a huge inflection point and I remember asking a gentleman who would have been your competitor at the time, Bill Daniels. I remember asking him in an interview the day, when did he know he was going to be rich? It was an interesting question and he’d answer anything. But he had a very similar story about getting a $50,000 commission on a cable deal. That’s pretty eye-opening.

Marcus: That’s what mine was…

Schley: Good. It must be the common number.

You’ve mentioned John Malone a couple of times as a figure who was prominent and important in your life. Can you talk (a) about that relationship a little bit, and then (b) could you identify another couple of people who have been kind of instrumental in the career that you’ve had?

Marcus: Well, John was certainly, I think, number one, instrumental in my life because when I was a cable broker, he was my biggest client. And we used to go around the country together buying up cable systems. It was really a wonderful opportunity to learn from him. He was the head of General Instruments at one point. Jerrold Electronics. He wasn’t a cable operator, but Bob Magness saw in him a person that could really come in and lead TCI. And John and I became friends and I'll never forget how John and I had flown out to Hawaii and we were trying to buy Oceanic Cablevision. I think it was Children’s Television Workshop and a few others. This might have been back in 1975. We had this meeting and it didn’t go well and we went out, probably drank too much wine over dinner (we didn’t drink wine then, probably something stronger). We were walking on the beach in Hawaii. And I looked at John and I said, “John, this hasn’t gone so well. But you're obviously—he was president of TCI—you're just on a great track. What do you think it would take to make you not want to work anymore and consider yourself to be hugely successful?” And he looked at me and he said, “Jeff, if I could make $5 million, I think I'd quit.”

Schley: Did he really. That was then, right?

Marcus: That was then. Boy, look what inflation’s done…inflations of ambition. But John and I were good friends. He actually was the inspiration for me to go into the cable television business because in 1979, we were out trying to buy cable systems and along with Rick Michaels, I had just bought a cable system in Richland Center, Wisconsin, from an independent operator. It had 2,000 subscribers. Once again, we were not successful in buying this cable system, but John, over dinner, he said to me, “Why do you buy that system in Richland Center?” And I said, “I want to become a cable operator, not just a broker.” And he said, “What do you know about running a cable company?” I'll never forget; I looked at him and I said, “Well, you do it. How hard could it be?” He got a chuckle out of that. And he said, “You really need to sell that to me because we own the Madison system and we need to own this.” It was 65 miles away, but over a mountain so they didn’t get any television. I said, “What are you going to offer me?” We had just bought it for $500 a customer or something. No, it wasn’t that. It was $662,500, that’s what it was. And I had scraped together a $100,000 down payment of which I had $5,000, and I raised $95,000 from other people. So John said, “I'll give you $1,000,000.” So that was three months after we paid $662,500. So I thought, this is a good business. And I said, “OK, we’ll sell it.” And I said, “There’s this much debt against it, but I want to have TCI stock for the equity. And he agreed to that.”

Schley: Why? Can I ask?

Marcus: Just because I was a great believer in the industry. I can't even remember whether we got the stock or we got the cash, but I don’t think he wanted to give me the stock. But in any event, he said, “I'll do the deal, but you've got to go get a rate increase.” So I said, “You’ve got to promise to deliver twenty channels.” So we made the deal and it all worked and it was that transaction that inspired me to go into the cable business. And it was a few years later that I sold my interest in CEA to Rick and I went out and formed Marcus Communications and the first cable systems that I bought were from TCI.

Schley: Perfect, a virtuous loop. What did you look for, what did people look for in the day, what were the characteristics that made a property attractive to add to your collective, if you will?

Marcus: When you're trying to form a cluster, it was, did this cluster well with your…

Schley: Geographic…

Marcus: Geographic cluster? And could you bring more services? Could you create better or provide better customer service? Can you create synergies because of the fact that it is clustered with your other systems? And where did it stand in terms of a physical upgrade. Was it a state-of-the-art plant, or did you have to put a lot of money in it?

Schley: People did pretty deep diligence, right?

Marcus: For sure.

Schley: Both on the brokerage side and on the operating side.

Marcus: You know, one of the problems I think that Charter had under Paul Allen is they were in a hurry to get big, and they paid big money for assets that they didn’t need to pay. They couldn’t get them to work so I think they were under-managed and probably needed to spend more capital and it just didn’t work out.

Schley: Did you ever imagine a day would come when the phone company, Ma Bell, AT&T, is such a prominent participant in the pay TV business?

Marcus: They always were interested. And years ago, they had these telephone leasebacks. I think they were called “Section 214” leasebacks where they would own the system and the cable operator would just lease it from them.

Schley: Tracing back to their heritage as the utility company that owns poles and…?

Marcus: So, look, I think that when AT&T bought TCI, that was their effort to get in the cable business. They didn’t do very well with that. They found that to be very difficult and ultimately sold out to Comcast as you know.

Schley: Now, with DirecTV and some of the online video stuff, it's still a prominent player in the business.

Marcus: But I don’t think it's been a great investment for them.

Schley: I don’t think so either. I think quite the opposite.

Marcus: I think they continue to not do well, and I think even Verizon, if they had to replay it, they probably would—

Schley: Might put their investment elsewhere.

Besides Malone, can you name an individual or two who sort of—you look back at your career in cable and this person made a difference in my life, or this person put me in a direction I might not have gone. There are probably a lot. I'm putting you on the spot. It's interesting to talk about.

Marcus: You talked about Paul Maxwell earlier. Paul and I used to be really close friends. We kind of lost touch. But Paul is always, as you know, a very iconoclastic kind of a guy.

Schley: Very much. That’s a good word.

Marcus: I always admired his free spirit and his view of the world.

Schley: Me, too.

Marcus: He was very different in terms of temperament and the way he looked at life from me. But that I think that was part of the attraction as a friend.

Schley: You're yin and yang a little bit…

Marcus: I sit here in Denver and I know Paul is somewhere nearby. I probably should look him up.

Schley: You’ll find him, but he was absolutely a champion of the industry in addition to being a journalist. I think it meant a lot to him to see this industry grow and thrive.

What would you say today—how old are your grandkids first of all?

Marcus: Four grandkids: 7, 5, 4 and 1.

Schley: So they have a ways to go. What is the attraction—what would you say to a young person who’s in college or about to get out of college—why is cable an interesting place to be career-wise today, if you wanted to pursue that world as a young person?

Marcus: I think what cable is facing today is a fragmentation of the video marketplace that has happened far quicker than I think anyone could have imagined. And we see this in our own viewing habits. And I know that the on-demand viewing that we consume in our household is so much greater than appointment television. Appointment television is sports, news and—

Schley: Sports and news.

Marcus: Right. Basically that’s it. So what I'm concerned about as a viewer is what everybody’s concerned about as a viewer, and that is: what do you want to watch, but you want to watch it when you want to watch it. And you don’t really care how it's delivered, you just want to get it in your home with the best picture, most reliable, good sound, etc. Theater-like quality. The challenge of the cable industry today is to provide that. So IPTV is no longer a luxury. It’s a necessity. And I think if you look at the loss of subscribers—DirecTV, AT&T, lost a million subscribers last quarter. That was almost the size of Marcus Cable.

Schley: I always make those comparisons. I know. It's stunning. But, as you alluded to earlier talking about existential threats, it's interesting to me how the cable industry has pivoted whereby the day may come where video is not such a major contributor to the revenue line.

Marcus: When you think about Apple TV, for instance, and we don’t really realize this, but when you click on Sundance Channel—I don’t know the economics of Sundance Channel—but recently at the Entrepreneurs Club, we were visited by a fellow that heads up the consumer business for Disney. And he was talking about Disney+ and he was talking about the commission that they're going to pay to the cable operators for the click-through. For if you have IPTV, and the cable customer is on IPTV—

Schley: Over my set-top box.

Marcus: —may click through and subscribe to Disney+, Disney’s going to give them the commission of the monthly fee. Apple TV, I don’t know this to be a fact on all programs, but their commission is very significant. So on your Apple box, when you go to Netflix and you go to Google or you go to any of these other services, every time you click on that, Apple is earning a commission.

Schley: It used to be 30%. And they’ve had a little bit of downward pressure.

Marcus: So that’s going to be and probably is today a huge revenue stream. So it's incumbent on the cable operator to be there. We have the pipe into the home. We have the ability to help that customer by being all things to that customer, giving them broadband, ever-increasing speed—

Schley: Connectivity.

Marcus: Whole home WiFi. Because if something goes wrong with your WiFi service, you don’t call—who do you call?

Schley: I don’t call Netflix. I don’t call Apple.

Marcus: So you might as well be, as a cable operator, you might as well get revenue for it.

Schley: So you see that—what's the word—the ability to be the bringer of convenience into this entertainment mix as a genuine role for the cable industry?

Marcus: I think it's all access. I think that the cable industry tomorrow is going to provide all access to all video products. To wit, to very robust connection, this broadband connection. WOW!’s footprint today—we are 100% 1 gigabit.

Schley: Wow.

Marcus: Thank you. And it's a great competitive advantage.

Schley: I follow a lot of the cable companies from a competitive intelligence standpoint and they are one who leads with the broadband product. That’s the entrée to the new customer relationships. And I think it's really interesting. It's smart.

Marcus: If you’ve seen the difference in your own home between 20 megabits and 300 megabits, it's huge. And as you get more and more connected devices, the speeds tend to—they use more bandwidth, they’ll slow down. So every home in America needs more and more bandwidth. And how do you get it?

Schley: I get mine through the cable company. But I think there's a limit to how much jerry-rigging people want to do to sort of create their own video portfolio. At some point you just want to give up and say, “Help me here.”

Marcus: That’s the interesting thing because you hear about all this “cord shaving.” Not cord cutting, but cord shaving. If you go and you buy a variety of services, and you go to the various channels, and this one is $5.00 a month and this one is $8.00 a month, and they're all morphing into the subscription model. Before you know it, you have a bill that looks a lot like the cable bill and more.

Schley: Some days I think, well, maybe people just want the self-styled sort of ownership of their own video service and they're willing to pay for that, but purely on a dollars and cents basis, I think you're absolutely right.

Marcus: I think what's going to happen is that there is going to be this disaggregation which is occurring and will continue to occur. And I think that the programmers that are all going to have their own little separate digital channels.

Schley: The direct to consumer…

Marcus: The direct to consumer channels. Because they're losing all this revenue. But then I can see a day when there will be an aggregation once more.

Schley: Maybe I'll be in a retired posture, but I think the same thing is going to happen. It's interesting; you get these cyclical—

Marcus: And the cable industry will be the gateway. It is the gateway to all of this. I'm not sure I would advise my seven-year old granddaughter right now to go into cable because by the time she’s old enough—

Schley: We don’t know what cable is going to be.

Marcus: But I think that the future for cable is still bright. And so does Wall Street. And if you look at the multiples, the public multiples, where the companies are selling, it's not so dissimilar to what the high watermarks have been.

Schley: It's really interesting. Well, we've had kind of a wide-ranging conversation, but it's been fascinating and really to be able to sit down and talk to one of the gentlemen who really did build the cable industry domestically, it's totally our privilege. So thanks for sitting with us.

Marcus: It's my pleasure.

Schley: Jeff Marcus. For the Cable Center’s Hauser Oral History Series, I'm Stewart Schley. We’ll see you next episode. Thank you.

END OF INTERVIEW