As of the Fall of 1994 with the terms of the Vulcan investment, we had lit the fuse committing ourselves to finding a distribution deal. If we were unable to find a partner to their liking, we faced a pretty ugly financing and the potential of a death spiral. A year of paper TV was also growing old and despite Halsey’s immense confidence and charisma, we were all starting to tire.
I tried to be the voice of rationality. “Reality Check” was supposed to be a segment for our pilots. After they were done, I stole the sign for my office. As I told folks they could not spend money on whatever, it always felt like the perfect decoration.
Late in 1994, we would begin discussion with USA Networks, one of the oldest and most highly distributed networks that was looking for better content to displace infomercials. Rod Perth, the head of programming, was intrigued by what we were offering since he could charge us like an infomercial for programming produced by a top notch production team in an area which could be potentially compelling to audiences. Before we get to those discussions, let’s cover some other things that happened in 1994.
One was that we were looking to add quality people especially in sales, the only way we could pay infomercial prices and not burn through huge piles of cash was to sell our own adds. My brain is a bit foggy so don’t hold me to these numbers but they point out our opportunity. Normal cable networks were selling at $4-$7 CPM (cost per thousand impressions). The computer magazines were selling at $30-$50 CPMs. We figured we could sell at a premium to cable rates because of the value of our projected audience and make back some of what we would lose paying for time.
This only worked if we could have a sales team that could deliver that. We had worked with John Barbara from the cable world as a consultant and had started trying to identify someone who could be full time. Pretty early on we were incredibly impressed with Lon Otremba. He has cut his teeth at CMP and when we met him was an Associate Publisher at Ziff-Davis. Ziff-Davis was the stand out publisher in the area with PC Magazine, Computer Shopper and PC Week.
We started talking with Lon early on and he would come visit us at our office space in NYC. Bettina and I would take him to lunch and would dance around the fact that we were sharing an office in the back. The other challenge was that as the distribution game kept being delayed we had to keep him interested but not commit to a hire until we had something. I am sure Lon recognized that we were in this delay dance and was too much of a gentleman to call us on it. For those of you that haven’t met him, he is an incredibly decent, smart and thoughtful guy. As Kevin was a seasoned executive that made our team better; Lon was the same. To think about taking yourself of the Ziff-Davis sales path was incredibly courageous and trusting of us.
Lon would join in August and he would bring along Paul Klein (“PK”) who had worked with him at ZD. There will be so many stories about PK going forward that I don’t need to spend time at this point. To say he is a character, under states what a character is. PK had incredibly enthusiasm, was unique and funny, did a great job as Lon’s number two and would hire and manage our early sales team.
In May, Nancy Guilbert and Thom Bird would fly up to meet with us about potential positions. Nancy was a Production Manager and Thom a Director. Both are stars and like Lon, we would have to do the dance until we thought we had something in place where we would need their services. In October, post Vulcan, they would join full-time. Pretty quickly we would ask Nancy to expand her role. Production Managers knew how to do things like payroll and expense reimbursement with which this CFO had more experience getting versus giving. She would become the heart of the HR department for years and years. Thom was very patient teaching a bunch of folks like Matthew do perform TV positions with no experience.
Chris von Rumohr joined in early 1994. He was a friend of Matthew’s from college and would be the first of a series of Matthew’s friends who all would join CNET. As we would work on paper television, Chris would fill in on anything and everything. One of the funnier moments was when we were trying to gather some covert intelligence on Ziff-Davis’s own TV ambitions. Chris would claimed he was a reporter from “Jacked In” magazine and do a full interview with the person overseeing their efforts.
One other story worth covering is our discussion with the cable network E!. Jarl Mohn, the CEO, had worked at MTV with Marshall. They gave it a serious look and really evaluated “fit” with their network. Dale Hopkins was the SVP for Marketing and helped lead the due diligence process. We would go to LA and attend focus groups with their viewers to figure out how computer content could possibly work in their entertainment focused content. It obviously didn’t go anywhere, but we all became friends and really appreciated that they treated us kindly which sadly was the exception in the cable world. This would not be the last chance for us to work together.
We also had meetings with CMP and Ziff-Davis about potentially collaborating. Always a bit paranoid, Halsey figured they were just trying to get competitive information. I usually was the person who went and would play nice. With Ziff, we met with Steve Rosenfeld who was just trying to get information and see the pilots. We actually did go back and forth with CMP, but couldn’t reach an agreement to work together.
On a personal note, one other condition of the Vulcan financing was that I needed to move to SF. Despite being one of the few people in the world who preferred NY, the lack of move had more to do with the constant delays in both finding distribution and financing. I kept thinking I would move as soon as I got something put to bed, so I didn’t want to waste scarce time worrying about a relocation. I had been staying on Halsey’s couch when I would go to SF. He and his wife, Deborah, were very generous and understanding. I returned the favor when Halsey came to NY. One visit when I was go down with the flu for a week, I stayed in Matthew’s apartment who thankfully was out of town. Finally, even with the company instability, I headed to SF for good. When I arrived in SF, Halsey, Kevin and the team presented me with this gift — a weight-lifting belt. It would hang in my office through all my years at CNET.
Halsey once said that you never have fun in business. Bad news is usually a surprise and shock, and good news has been so long expected that when it comes it is anticlimactic. Thus is the case with USA Networks finally coming to the table. You would think after all the pain, I would have this strong memory of the call and meeting where we would finally get the distribution deal. Not so, I don’t remember much.
I do remember Rod wanting to get rid of infomercials and being a terrific guy. I can remember Kay Koplovitz being at 20,000 feet and being encouraging, and Steve Brenner, the resident hard ass, taking the role of negotiator to make it happen. Steve was tough and a creature of the cable world, a box we didn’t fit into easily. There were lots of arguments, on lots of things. One in particular was whether we could put clips of the show on the Internet. Steve being worried about somehow pissing off cable companies was against it and, obviously, Halsey believed that this would be the future and was for it. I guess they both were right. Steve would become a friend and an advocate for us going forward.
We would enter a three year and one quarter deal for a 30 minute show, CNET Central. They would commit to air the show on USA as follows: Saturdays 9:30am to 10am (9:00am to 9:30am for first 24 weeks), and Sundays 6:30am to 7am, and Tuesdays 1:30am to 2am. On Sci-Fi, Saturday 10:30am to 11am , Saturday 10:30pm to 11pm, and Mondays 2:30am to 2:00am. We would pay them $146,666 per month for first 65 weeks, $125k per month for next 52 weeks and $150k per month for last 52 weeks. Additionally, we would provide them warrants on 10% of the company that would vest based on them airing the show (this would later become a problem after we went public). Sci-Fi was the newer, smaller network with less content, thus the better times.
Looking at the terms of the USA Deal, we had thought the fuse was lit when we signed the Vulcan deal. Now we would be burning $146,666 per month before we paid anyone or produced the show. The fuse was bigger and faster burning than ever. Yikes.
I remember that belt, too! I love these posts, Shelby.
Okay, now I'm slipping to the edge of my seat, still about 2 years before I started. I certainly remember the belt.