Welcome to Tech Stuff, a production from I Heart Radio. Hey there, and welcome to tech Stuff. I'm your host job on Strickland. I'm an executive producer with iHeart Radio and I love all things tech. And it is time front of a classic episode and it's actually gonna be a continuation of our previous classic episode. So this episode the HBO Story Part two, originally published on May seven, and um, we are just going to jump right in, get back into the story. Let's go. HBO as an entity, has heavily influenced what cable television is and what entertainment delivery services are in general. If it hadn't been for HBO, our landscape would be dramatically different today. So that's why we're doing it. In fact, think about it. Without HBO, you don't have cable companies, cable system operators pushing cable copper cable into cities anywhere near as quickly. Right, you might not have ever seen it happen, or it might have taken a decade longer, which means you would not even have the infrastructure that the Internet relies on today. For high speed internet, we'd be using telephone lines. Still, yeah, you might Furthermore, not have had people adopt as quickly the idea of using satellites to beam information, uh television information out to many far spread networks. Exactly So, like we said, landscape very different without HBO. Whether you love it or hate it, it's a large part of why the world is as far as the cable world and entertainment worlds, why things are the way they are so so um. A little tiny bit of backstory, very tiny. HBO owned by Time, Yes, Time Incorporated, not not Time, the the physical entity like the actual not Father Time, the progression of changes throughout not the fourth dimension that we know of, Time Incorporated, the company that owned Time magazine or still does Time Magazine, Fortune Magazine, Sports Illustrated, etcetera, etcetera. Correct. So, in Time launched a second pay TV channel called Cinemax, primarily as a competitor to the less expensive Showtime. Yes, so, there were a couple of different ways to compete against Showtime. One was let's try and grab as much exclusive content as we possibly can that Showtime can't have. And thus people will say, hey, we want HBO because they have these movies and Showtime doesn't. However, that's really expensive Another approach was to create a second paid television network, Cinemax, and to run a lot of the same programming that HBO itself already had, and maybe concentrate on some genres that didn't necessarily fit into HBO's corporate appearances, like they're there, their their culture, and furthermore, that happened to be a lot less expensive to purchase. Like I like cult films and kind of obscure noir stuff. One of my favorite cult films of all time I first saw on Cinemax. I had heard about it, but I've never seen it. And that film, of course, is the brilliant movie Shock Treatment. The not a sequel, not a prequel, but an equal to the Rocky Horror Picture Show. And that's how I saw it the first time I ever experienced it. It was shown on Cinemax because it fit into that realm of the Cinemax movie where it were there were some of these kind of cult classic, schlocky, sort of cheap movies to license, but they still had their audience. So this approach did not come without criticism, specifically from Viacom, which was the parent company of Showtime. They said that Cinemax was being offered at below cost. In other words, HBO was suffering a loss to run Cinemax just so that they could undercut Showtime. Uh now, if you remember Showtime kind of Viacom also did this thing in the last episode we talked about, where it showed Viacom end up by aggressively undercut HBO. They essentially muscled HBO out of entire markets because they made this exclusive agreement with the largest cable provider in the United States at that time. So there's a little bit of a war going on. Yeah, a little bit of a oh yeah, so yeah, that's that's kind of the technical term. But Cinemax, you know, starts doing pretty well. And also in nineteen HBO has an affiliate in every single state in the United States. Now, if you listen to our last episode, you realize that's a big deal. This is the first time that any channel has been able to do that, and it is because they're using this satellite delivery system where the various cable operators across the United States have the receiver dishes that bring in the signal and then they can distribute it to their customers. So now there's an affiliate in every state. Remember, It started off justin Wilkes Bar, Pennsylvania. Then it's spread through most of Pennsylvania, then to New York, and then finally started to creep out into the rest of the United States. So big moment for HBO. All of this is allowing them to have a pretty incredible profit considering that they only hit profitability a year or two previously. Um. They their profits have grown from which again understandable because now they're they're available in way more markets. So the company is experiencing astronomical growth at this point because because once the cable operators decide yes we will carry HBO, that gives HBO the chance to target new customer bases that they had no access to before. Oh sure, um and there as a result able to offer their employees some pretty ridiculous benefits. Um It kind of the stories that I've read about it at the time remind me a little bit of what happened after the Facebook boom, um and and just that that tiny, free, free wheeling startup culture that turned into this very large, very freewheeling startup culture. It reminds me a lot of what Google attempts to continue to push at the Google Plex and of course, anyone who's worked in one of the satellite offices of Google probably is very familiar with what things, what what's available at the Googleplex versus what's available in some of those satellite offices. So there was also some tension between say HBO and the folks over at Time. Keep in mind that at this point they're still all working in the same building. They're working in Time Incorporate its headquarters, and so you had sort of these freewheeling young guys who are running HBO, who are having parties all the time. They said that essentially, the the motto at HBO is work, work, work, party, party, party and uh. And so you know, any excuse to get together and have a big dinner, and you know, they're still getting stuff done. But they also took a lot of time and developed this camaraderie. There's still some tension actually within the company itself because a very different culture existed between Time and Coorporated employees and HBO. Now in one Showtime makes a big move, which you could argue at the time, Time was mostly posturing. Uh. They decided to go to a full twenty four hour schedule, right because if you remember from our last episode. Again, at the time, these cable stations would sign off at a certain point every night. Yeah, like after midnight they'd say, all right, time, time to go to bed, because we don't have anything else we can show you. So showtime goes to twenty four hours, not necessarily being able to support that with enough content so that they're not incredibly repetitive, but HBO, not to be outdone, follow suit. So later on in they also become twenty four hour. Uh. And so you with anytime you wanted to turn on HBO it was three in the morning, you can turn on HBO and something would be playing. Uh. And then they end up also hitting the big time on one of those pre buy movies we talked about. Now, this is where HBO puts in money in the pre production phase for a movie and in return, they get exclusive rights to show that movie on HBO for a certain length of time. And in this case, they hit the jackpot. Now, it's not a movie that I think a lot of people are going to be rip roar and excited about, but it was a critically acclaimed success. It was on Golden Pond. Yeah, it won multiple Academy Awards. YEP. So this exclusivity was a big deal. It was a movie that people had heard about, they knew that it was award winning, and HBO was the only place you could see it outside of the theater. Keep in mind, this is before the home video craze starts, like, this is really before the VCR has taken off, So HBO exclusivity in this case was really important. Now they started moving to these output deals, which is when a pay TV service agrees to take on all the movies made by a certain studio over a certain time span. Again, tends to be kind of a grab bag situation. You might get a few big hits, you might have some mediocre films in there that you know, some people care about but most people don't. And you could have some outright flops. So a little bit of a risky situation. There's also this idea of a multi year agreement which HBO would have agreed to pick up a certain number of films the studio would produce over a given period of time, but have a little bit more safe which one like you made. We want twenty movies that you guys are going to make over the course of the next five years. Yeah, so once the five year period starts coming up. You're like, well, now we're stuck. Yeah, but but we got to be choosy at the beginning. Either way, these exclusivity deals were really really expensive, and it meant that it was tough to to make a profit unless you continuously grow. Now, at this time that wasn't a problem because cable was still entering in lots more markets, which meant you had access to brand new customers. So in the early days kind of automatically growing. Yeah. Yeah, you didn't have to worry about about boosting your your customer base so much because people were still eager to join. It wasn't until a couple of years later that things got a little tougher, but we'll get there. So companies were paying these big bucks for exclusive rights to movies for just a couple of years. Eventually those exclusivity rights would expire and those movies could be carried on other pay television stations like Showtime could pick it up. So in the long run, you would have a bank of movies that was essentially identical to your competitors. So for a couple of years you'd have exclusivity, but it wasn't a long term You would wind up evening out. Yeah. So yeah, one of those things that that you know, they really had to look at a little bit later because it was just it was not the best way to continuously grow your revenue. Now three, we get one of my favorite stories. Yeah, yeah, okay, this this is a big one. So so twenty century Fox negotiated to get Star Wars onto pay TV. Yes, so Star Wars big movie in ninety seven. Of course, that's when Return of the Jedi came out. So the original trilogy, you know, the only one that exists, is complete at this time. And Star Wars itself, the movie that started it all. Uh, the second big blockbuster following Jaws from Live is available to go on to pay TV. However, it's not an exclusive deal. This is something they they negotiate to put it on every page television station essentially, so Showtime's gonna get HBO is gonna get it now. Normally, the way these channels like to try and and position the big ticket items that they get is to wait and put it out on prime time preferably like eight pm. Yeah, Friday, Saturday, Sunday night, Sunday night, probably preferably to to really get all of the home viewers in right, so you would you know when the weekend would come around eight pm. That's when you could be guaranteed that that was when the biggest movies were going to be uh showcased on these pay television stations. However, Star Wars was such a big deal, being that summer blockbuster, that both Showtime and HBO wanted to make sure they took advantage of it and did not allow the other channel to show it before they did. So HBO didn't want Showtime to show it first. Showtime didn't want HBO to show it first. According to the agreement they signed with Fox, neither could show it any time before six am on February one, So both of them scheduled the first showing of Star Wars to be six am, February first, even knowing that that's not an ideal time for their customers. They just didn't want the other one to get the scoop, and HBO went a step further. So remember in that last episode where I talked about cable being a cutthroat business and nothing is really you know, off limits, that includes bribery. That's probably a strong word. HBO didn't bribe twentieth century Fox. Well they paid them more money. They paid them more money. That's very much like a bribe. Yeah, so that they could be allowed to show Star Wars one minute after midnight on February one, so six hours before showtime could although they weren't allowed to announce it. Yeah, so you had to have been watching HBO at one midnight after midnight on February one to have noticed that this had happened. However, the they were able to say legitimately that they were the first to pay television station to carry Star Wars, and that actually carried some weight. There were people who said, wait a minute, why is HBO showing it before showtime? I should have HBO not showtime, despite the fact that we're talking about a six hour window when most people wouldn't be watching television anyway. Um that that part didn't matter. So very interesting that this battle happened. It was another expensive battle, but an important one. As we all know, Star Wars one of the most important pieces of art created in the history. There's like the Mona Lisa Star Wars David, that's the order it goes in. So three also was there another amazing piece of art premiered on HBO and original program aimed at children. Yeah, Jim Henson's Fraggle Rock yep down in Fraggle Rock. So I was a huge Fraggle Rock fan back in the day. Um. They actually came to dragon Con and we covered the dragon Con parade. We actually shut this coverage. Me and Ben Bowen and Lauren You were there and we did it like Macy's Thanksgiving Day Parade style. It never it never saw the light of day, probably because there were long stretches where nothing was happening. We we we haven't had anyone had time to edit the whole thing really long. Yeah, but were in it. They were in it. And there is a photo gallery that I did. I was running a still camera through the parade and so and and she she waved at me. Yeah. I got choked up. Yeah, I got choked up watching the Fraggles. I mean, I'm not I'm not embarrassed to admit it. The Fraggles are meant a lot to be I'm getting a little tiory right now. In fact, all right, Well that was the first segment of HBO Story Part two. We've got more chapters here. The Game of Thrones, I think I guess we'll find out, but first let's take a quick break. Now, Jim Henson had already had a relationship with HBO. HBO had produced a couple of years earlier a Christmas special, immitt Otter's jug Band Christmas. So now Jim Hinson had the the freedom to create this entire children's series, which lasted five seasons, and it ended up being a big success. It was one of the few breakaway successes of children's programming on HBO. A lot of the other programming UH people liked the idea of but no one ever bothered to watch, so Fraggle Rock was not among that. That was an incredibly popular show, in fact, so popular that HBO would end up making other versions of Fraggle Rock for other countries, and some of them would have their own version of Doc and Sprocket that wouldn't necessarily be called Doc and Sprocket, and they would be different people, like the I think in England it was like a lighthouse keeper who was really crabby. But anyway, they would also be dubbed into different languages, so everyone had their own version of Fraggle Rock, which was kind of cool. It wasn't just a you know, it wasn't just switching out the soundtrack. It was actually Taylor made to These Nations and another series that premiered that year, and I remember the series too, was not necessarily The News, which was kind of a news parody sketch comedy show. It was the news thing was kind of the the conceit the book ends for these various sketches that may or may not be very loosely connected, right, And it was kind of Brian's very first television writing gig also uh, not consistently very good, but but one of the examples of HBO getting into original programming, which is again they started looking at how to differentiate themselves from the showtimes of the world, and these exclusivity deals, like we said, could be really really expensive, so maybe making original programming would have been a better approach. Now they learned that making good original programming is very tricky. It might not be expensive, but it's very hard to do, and getting people to pay attention is also sometimes tricky. Right. Yeah, Sometimes they would make an amazing show that the critics loved in nobody watched. We will talk about several of those in our third episode. But meanwhile, twelve years after its inception, HBO finally got their own offices. Yeah, they moved over into a building on Avenue, and it had the nickname the flash Cube. All right, kids years ago, like in the eighties, cameras which had film in them, none of this digital stuff also had flash you know, flashes, like a separate flash unit that you had to attach to the top little cube that would flash light so you could get some light on that image you're trying to capture onto film. That's why it was called the flash cube because the building looked like one. So this building that looked like something you've never seen looked exactly like just just like that thing. So now you had a building where the actual departments could all sit together. The divisions were no longer divided. They could all be in a cohesive unit. So that amazing camaraderie they had developed back at Time Incorporated, when they had this kind of startup mentality went away. What's completely ruined. Yeah, suddenly they were physically closer and yet emotionally so distant. Um. It turned out that HBO was starting to become more of a business, less of this kind of startup entrepreneur approach and I had more of a of a corporate structure. Yeah, And it also was when HBO started to notice that growing as a business was going to get very difficult, they did what was called hitting the wall. The wall in this case was saturation. You had a saturation point where cable had pretty much entered all the markets that was gonna go into. So that meant that you no longer could expect to suddenly have access to twenty thousand new subscribers potential new subscribers because someone finally built the infrastructure out to this one region. Now all the regions pretty much had cable, so there were not going to be any of these these gift baskets of potential customers just arriving at HBO. They were gonna have to work for it. And also on top of that, they had a churn rate going on, right. So churn rate is when you lose a certain number of customers over a course of a general amount of time. So there's was about two per month back in which means that in order to just stay even, you have to grow by two percent, right to to just maintain the same number of customers from the beginning of the month to the end of the month. If you want to grow beyond that, then obviously you have to get more than two percent new customers to replace the two percent who who left. Now, some of the people who left they left because they were relocating and eventually maybe they come back, but some of them were just saying, oh, I don't want to have this expense anymore. So you had to convince them, hey, we're worth the money, or you had to convince new people, hey, we're worth the money. And now there were fewer new people to get access to. So this was a very scary time at HBO. You had this young company that had been used to this incredible growth suddenly realizing, oh, things are not going to be as easy anymore. We're not going to have this essentially blank check that we can hand out for these exclusivity deals. We're not going to have this this endless line of new customers coming in through the door. What are we gonna do? And in fact, one of the first things they had to do was layoff about a hundred and twenty five employees, which was the first time in HBO's history that people had been let go like that. Also, around the same time, the VCR became a thing, and that was a boy talk about a big bite out of the business. So keep in mind, remember this is the time when HBO their main purpose was to create way for people to watch these movies that were uncut and uncensored that wouldn't be carried on broadcast television. But now, with the birth of the VCR and the growth of the home video market, where you could go to a rental store and rent a movie, you can get access to all sorts of movies beyond the what we'll call the playlist that HBO had access to. Remember, HBO is paying licensing fees to be able to show these movies, so they don't have licenses for every movie. They have to pick and choose, and sometimes they pick before they even know what the movie is going to be like, and sometimes they lose out on that. Oh sure, and they can only air so many things at a time, They can only pay to keep so many things on the air at a single time, and whatever they happen to have might not be what you feel like watching. Once once stores started carrying rentable VHS tapes, it was I mean for for younger listeners, I mean, like I have a hard time imagining this and I remember VHS tapes. I remember all of that very clearly, and it still sounds crazy to me that you that there was a time when you couldn't just watch whatever you wanted. Yeah. Now, you would go into the store and you would hope that that one copy of Young Einstein was still available, because you know what a breakaway hit that was. Um, hey, that was an important film. Hey, yeah, who's serious one of my heroes. Okay, I'm not don't take any thing away from the series, but yeah, just just the fact that you go into the store, you know, and hope that the thing is the movie that you want is there. There was an illusion that you had a more choice with the home video market. Now, the true was dependent upon how many copies of a certain movie the rental store had and how big a customer base it had, because there might be some movies that, unless you just looked out, were constantly being checked out. So so it seems even if Blockbuster had thirty copies of whatever it was, it might all be gone right. So so hypothetically you had a much larger choice, but in practice it may or may not have happened. And either way, it was probably more than just Beast Master over and over. Yes, HBO started getting the There was a joke that HBOS actually stood for Hey beast Masters on um. Yeah, that that was the That was again a comment about the repeats UH and UH, which were the movies that had been shown multiple times within a certain licensing period, and returns, which were movies that were still under license but had been pulled out of the circulation of movies shown on HBO and then reinserted later on. So you know, HBO licensed out these movies and those licenses were very specific. They would say you can show this movie X number of times and during these times of day, Like, they were very the way you had to program and HBO schedule was dependent upon these licenses because some of them were like, Okay, we don't want you showing this this movie before six pm. Well then they would have to plan that out, you know, before six pm and after midnight. I'm sure that FCC regulations and stuff like that would prevent some content from being shown during HBO specifically police themselves and put they would not allow anything that was R rated to go on before eight p m. So it had to be after eight pm to to go onto HBO Uh, there was largely a self imposed rule, and it was just an easy one for them to to go with because they knew that that would be something that would most likely fit their subscribers desires and would at least mollify the kind of groups that would have had complaints otherwise exactly most of them. Yes. So anyway, those life since has put limiting factors on HBO how many movies they would have access to it a given time, how many, how frequently they could show it. But then HBO also had this model, this business model, where the idea was, we're going to get this pool of movies. We're gonna make a schedule where we're going to show these movies at different times on different days, so that our customers can look at the schedule and say, oh, the movie I want to see is gonna be on at six pm on Wednesday. I'll make sure to watch it on Wednesday at six pm. But instead, what they found that was that people were treating HBO like it was a television channel. That's ridiculous. Well, I mean, you know, once again, once BCRs entered the picture and they could just record something, yeah, it didn't matter so much about when it was on, but they and also yeah, someone would just turn on the TV and just be like, oh, what's on right now? Okay, yeah, oh it's beast Master again. Yeah. That was the problem was that people were not treating it like the way the company had thought of the service and we the movie theater, which yeah, exactly. We've seen this happen in other industries, right, We've seen it where someone creates a service, let's say Twitter, great example, someone creates a service and they have in their mind the way the service is going to be used by the customers, and customers go, oh, this great thing for this entirely different purpose. And so if you're a good company, you move with the customers and you don't try and force them into a model that they don't want, because otherwise your your business suffers. So HBO started seeing, oh, we're gonna have to think of some other way to change up our programming so that we don't have the same you know, list of movies showing so frequently, because we're going to end up driving customers away. And we're already having to deal with this churn issue and the saturation issue. So all of these factors we're going into HBO and the executive's minds thinking all right, we gotta we gotta think of a new way of approaching content. Meanwhile, Michael Folks, who we had talked about in the last episod So, who had come over from a talent agency and had joined HBO. He becomes the head of HBO. He replaced Frank Beyondi, who had pretty much been forced out. He had made a really expensive licensing agreement with Columbia Pictures. Uh, there's a little movie called Ghostbusters that nearly broke the bank for HBO. We're talking like millions of dollars, like forty million dollars just to have this one movie because they had agreed beforehand, before knowing what this was going to be, and there was no cap on how much they could spend. So that deal pretty much melt the in for Beyondi. Yeah, well that that was. That was the first place that I saw Ghostbusters. So wow, I saw it in the theater opening day. The librarians, what are we? I was two. We've got more to say about this chapter in HBO's history, but before we get to that, let's take another quick break. All Right, We're up to nineteen five and that's what HBO decided to launch a big summer advertising campaign. Now. They they saw that the wall had hit, They saw this saturation in churn issue, they saw the exclusivity issue, and they thought, how can we attract more customers so that we can continue to grow, And they decided that they would really concentrate in an advertising campaign that spanned the summer of n and they would repeat this a couple of times. Oh yeah, yeah, and why the summer, you ask. Summer is a when kids are out of school and parents need something to do with these suddenly free tiny humans. Yeah, most of us have to continue to work in the summer months, and so how do you keep the tiny humans from rising up against their masters and enslaving us all good HBO. Furthermore, as most of us know, summer is when many television shows are in reruns. All of the all of the really big primary prime time sort of things are broken for the summer. Yeah, broadcast television is tends to be pretty pretty barren over the summer, like you're either watching reruns or especially just don't care about especially back in those days. These days, it's changing a little. It's a little bit. It's a little bit now where you can get interesting programming. Yeah, especially now that you have shows that are dividing their seasons up into season breaking bad, you don't don't perpetuate the breaking bad problem. I mean, breaking bad great show, but you know, splitting up your seasons, oh bad, breaking bad bad? All right. But anyway, Yeah, HBO decided, hey, we we can take this opportunity to really grab this this audience that doesn't yet subscribe to HBO. So what they did was they sent ads through direct mail and they also did telemarketing. They called people, cold calling people to convince them to sign up, and as irritating as it was, it was worked. Yeah. They sent six hundred forty million ads to folks between six billion, twice the population of the United States. They also did start investing more in original programming. Yes, um, and and you know, sports was something that they had been doing since the beginning. Yeah, that was one of the you remember the two things you could watch an HBO when it premiered was a movie, uh that that was about logging and a hockey game. So sports had always been part of HBO. Also, stand up comedy specials had been a part of HBO since the early days. Oh yeah, yeah, those really great old rap and Williams or Richard pryor special. Steve Martin had a good one too. Yeah. You had a bunch of people who were the the kind of the loudest voices of comedy in the seventies and eighties. George Carlin another one. Some amazing comedians who would get their HBO special And even to this day you'll hear comedians talk about, you know, feeling like they made it when they got an HBO special like that. That was like a mark of success. You know, that's when you know you've you've arrived. They continued to do that, so stand up comedy also big. They also ended up backing several documentary series. They ended up creating several series, including a brand called America Undercover. There are several documentaries in that series, and that helped to differentiate them again more from the showtimes in the world. Now, keep in mind Showtime at this point not really getting into original programming that much. They were still very much dependent upon the uncut, uncensored versions of movies. HBO was trying to kind of break away from that a little bit while still having movies on the channel, but trying to differentiate themselves by adding variety that you could not get anywhere else. A right, right, it's a little bit, if you remember from our cable provider and streaming media discussion, or I mean, if you pay attention to the Internet these days, a little bit of what what Netflix is doing to kind of try to move itself forward in front of channels like HBO. In fact, if HBO had not done this, we would not have a Netflix, and we certainly wouldn't have a Netflix that's making its own content. Same thing with Hulu, same thing with am is on. The reason why they're able to make their own content, why that's a viable choice is because HBO tried it and made it work. Now, not everything HBO did with the independent stuff that they did, the original programming stuff worked and we'll talk a lot about some of both the successes and the failures. Um, not everything caught on. However, they also partnered at that time with a company called Thorne E m I, which was an independent film producer and video distributor. So their main business model was to partner with other movie studios that did not have a home video distribution market. So some of the big ones did they They had They had it all in place where either they had their own production company or distribution company or they partnered with someone already. Thorny and I would would partner with lots of smaller, smaller distribution companies. So they ended up getting a lot of um we all those cheap action movies, you know, the ones that started Internet, Darling, Chuck Norris, those were big ones. But uh. The following year six, Cannon Pictures bought out thorn em I's interest, so HBO and thorny em I had um HBO and thorny Emi had partnered together. Cannon Pictures comes in buys out thorn em I, but still partners with HBO and it becomes HBO Slash Cannon Video and again most of the movies low budget action films, awesome movies, not taking anything away from him. By seven, HBO Cannon ends up being renamed HBO Video. Short time later, it changes names again to HBO Entertainment and they had a few successes, but really it was touch and go for a while. It wouldn't be until HBO original programming really took off in the nineties when HBO Entertainment had it made. Because now they became the distribution for HBO originals that everybody wanted to have, all right, but at the time it was really just scraping by. Moving on to Night six, that's when HBO established HBO Showcase, which was an actual production company. So they had already moved into distribution, and they had a production company over on the West Coast in Los Angeles called HBO Pictures, but now they wanted to create another production company on the East Coast, so this one was based in New York. And the idea was to make grittier, more you know, kind of realistic or hard hitting movies than HBO Pictures was known for. So their first picture was about a KGB agent who was involved in a big CIA operation. This was actually a true story about Uri Nasinko. So they they were going kind of this this hard, gritty route, and in general people said it felt more like HBO, whereas the stuff from HBO Pictures a little more you know, glossy and glitzy. Certainly had bigger budgets, had access to bigger names, so you saw more movie stars in HBO Pictures productions, but the HBO Showcase would be the kind of more down to earth stuff. So both of these would eventually merge together and become HBO Films, and Colin Callender, who had been the head of HBO Showcase, became the head of this whole department. I'm sure there were some grumblings on both sides. I'm sure the the the Showcase folks were thinking, you know, they get all the money and they get they get access to all that talent, whereas the pictures folks were probably thinking, they have this crazy reputation, which we should have because look at what we're doing. So so everyone get together and play nice. Yeah. Uh. Fortunately they were separated by the rest of the United States, with one being in l a and the other being in New York, so I think they could. They were insulated enough where it wasn't too much of a problem. Also in now, this is another big moment in HBO history because it established a practice that ended up becoming an industry wide standard. It's another reason why we really wanted to talk about HBO at length, because so many of the things they did influen inst multiple industries. In this case, they began to scramble or encode signals full time for those satellite signals. Now, if you listen to the first episode you learned about HBO using up links to send a signal up to a satellite, which used transponders leased by HBO to amplify the signal send it back down to down links across the nation to cable providers, because it spread out over the entirety of North America, and at this point, the cost of purchasing a satellite dish for yourself head lowered to the point where where common families could purchase one if they wanted yea, if they if they saved up. I mean, even back when it was still tens of thousands of dollars. You had a few crazy people with lots of money buying these things because the signals weren't scrambled, the signals were clear. So so once you bought in what i mean for for the purchase price of that satellite dish, you could watch whatever you wanted to absolutely free. And so pay TV stations didn't like this because you didn't have to subscribe to cable at all. Cable companies didn't like it because you didn't have to subscribe to cable at all. You just had this dish, which at the time was enormous. Uh. This was before they had developed the the dishes that are more common these days. This is when if you remember back in the eighties, the enormous satellite dishes that might be out in front of someone's yard or in the backyard. That's what I'm talking about, the big like nine footers. So you're able to get these signals clear. And not only that, broadcast television hated it. And you might think, well, why did broadcast television hate it? You could get those shows for free using an antenna. Well, it's because those shows aren't really free. The reason why those shows are are possible at almost because their ads supported, right, advertisers by advertising time on those shows, and that money goes to the production companies. They are more steps in here, but in general, the production companies are able to make shows because the money made through advertising. Well, if you're using a satellite to pull down the raw feed, you're getting the raw feed, you're getting what's called the back hall feed, which is before they put any commercials into the content. So you were getting commercial free content from all the different providers, something that broadcast and cable stations and cable providers all hated. So how do you fix this problem? Well, what HBO decided to do was to invest in this encoding and scrambling technology. They ended up going with General Instruments Video cipher to to encrypt the audio and video signals. Once they've done that, you'd have to have a decryption box on the private end in order to decrypt the signals. Right, So cable companies had these D scramblers, Right, they can just descramble it, and they had an agreement with HBO. Originally it was just HBO, but other other channels would follow suit. So HBO ended up, like I said, creating this industry standard approach. So the cable providers would all have these D scramblers. And as a private citizen, you could get a D scrambler, but uh, it wouldn't necessarily work. You'd have to pay HBO to have access. You could actually go out and buy chips that would decrypt things for you, but often these chips would only be good for about a month, and what would happen is that the provider on the other end would see that someone usually it's some fake address that's been made out to a customer has not paid their bill, and so they cut off the service. So for a month you have service and then suddenly you don't. So people kept trying to find ways to get around this, but it meant that for the most part, it was much harder to pirate a signal. Now this made satellite dish owners very, very angry. They felt entitled to the stuff they were stealing because, in their minds they had paid thousands of dollars for a Sally dish, therefore they should have access to all this content, despite the fact that all the content providers are saying, yeah, see, the money you spent didn't go to help pay for the actual content, and unless we get paid for the content we make, we can't make it. So you're actually talking about a behavior that ultimately will completely destroy the business that you want to to enjoy. You want this content, you want to be able to watch stuff, but if we're not getting money for it, we can't make the stuff you want to watch. But the satellite provide satellite owners said, I want my free HBO. So Jonathan has some opinions. I don't side with the pirates on this one. To be honest, I understand. I understand the other arguments, which we'll get into when we talk about streaming. I'll you know, it's not that I don't feel empathy for folks who want to have access to content. It's just that if you had the choice of either spending thousands of dollars for a satellite dish and then stealing everything or just that that is a different issue. And it's a little bit on the silly end um. But meanwhile, also in six uh, Jeff Bukes became HBO's chief financial officer. He wouldn't be finished rising the ranks because if you listen to our last episode, we kind of gave it away. HBO launches Festival. This is gonna sound like it's a like it's a Dejah all over again. All right, right? Remember take two? Yeah, that was the idea of creating a kid friendly network that was lower priced, so people who weren't either willing to pay the full subscription price for HBO or objected to the content would have an alternative. It also did not work. Yeah, apparently they didn't learn anything from Take two because Festival to me sounds like it was the same thing, exactly the same thing. Yeah, it would it would find up getting canceled entirely than a year. Yeah, the problem was that they were trying to target two different populations. They wanted to target the conservative older people who didn't want all that filth on their TV, and they wanted to target families with young children who wanted to have kid friendly programming. But the problem was all the older conservatives said, why do you have all this children programming on my station? I don't want any of this. This is not interesting to me. And all the families were saying, I got this channel so that I could watch stuff and my kids could watch stuff. But when my kids have gone to bed, the only stuff you have on is on Golden Pond times in a row. I don't care about that. So neither target audience was satisfied. So it's the lesson here is if you want to target two very different audiences, splitting the difference hardly ever works. Yes. Um the next year though in Something with Kids did work out. Yes. The Kids in the Hall in fact, premiered on HBO Canadian sketch comedy Troupe Brilliant, one of my favorites seen him live, Good stuff. And that wraps up the HBO story Part two. Next week we will have the part three of the story, and again Like I said, a lot has happened in the years since, so I'll probably have to do an update to this at some point and talk really about how HBO and Warner Brothers have really transformed the entertainment space, particularly in a world that went through a pandemic that really shook things up in a big, big way. But that'll have to wait in the meantime. If you have any suggestions for topics I should cover in future episodes of tech Stuff or ones that require an update, let me know. The best way to do that is to reach out on Twitter and the handle I use is text Stuff hs W. Next week we're gonna have part three of this, so stay tuned for that and I'll talk to you again really soon. Text Stuff is an I Heart Radio production. For more podcasts from my Heart Radio, visit the i Heart Radio app, Apple Podcasts, or wherever you listen to your favorite shows.

Welcome to Tech Stuff, a production from I Heart Radio. Hey there, and welcome to tech Stuff. I'm your host job on Strickland. I'm an executive producer with iHeart Radio and I love all things tech. And it is time front of a classic episode and it's actually gonna be a continuation of our previous classic episode. So this episode the HBO Story Part two, originally published on May seven, and um, we are just going to jump right in, get back into the story. Let's go. HBO as an entity, has heavily influenced what cable television is and what entertainment delivery services are in general. If it hadn't been for HBO, our landscape would be dramatically different today. So that's why we're doing it. In fact, think about it. Without HBO, you don't have cable companies, cable system operators pushing cable copper cable into cities anywhere near as quickly. Right, you might not have ever seen it happen, or it might have taken a decade longer, which means you would not even have the infrastructure that the Internet relies on today. For high speed internet, we'd be using telephone lines. Still, yeah, you might Furthermore, not have had people adopt as quickly the idea of using satellites to beam information, uh television information out to many far spread networks. Exactly So, like we said, landscape very different without HBO. Whether you love it or hate it, it's a large part of why the world is as far as the cable world and entertainment worlds, why things are the way they are so so um. A little tiny bit of backstory, very tiny. HBO owned by Time, Yes, Time Incorporated, not not Time, the the physical entity like the actual not Father Time, the progression of changes throughout not the fourth dimension that we know of, Time Incorporated, the company that owned Time magazine or still does Time Magazine, Fortune Magazine, Sports Illustrated, etcetera, etcetera. Correct. So, in Time launched a second pay TV channel called Cinemax, primarily as a competitor to the less expensive Showtime. Yes, so, there were a couple of different ways to compete against Showtime. One was let's try and grab as much exclusive content as we possibly can that Showtime can't have. And thus people will say, hey, we want HBO because they have these movies and Showtime doesn't. However, that's really expensive Another approach was to create a second paid television network, Cinemax, and to run a lot of the same programming that HBO itself already had, and maybe concentrate on some genres that didn't necessarily fit into HBO's corporate appearances, like they're there, their their culture, and furthermore, that happened to be a lot less expensive to purchase. Like I like cult films and kind of obscure noir stuff. One of my favorite cult films of all time I first saw on Cinemax. I had heard about it, but I've never seen it. And that film, of course, is the brilliant movie Shock Treatment. The not a sequel, not a prequel, but an equal to the Rocky Horror Picture Show. And that's how I saw it the first time I ever experienced it. It was shown on Cinemax because it fit into that realm of the Cinemax movie where it were there were some of these kind of cult classic, schlocky, sort of cheap movies to license, but they still had their audience. So this approach did not come without criticism, specifically from Viacom, which was the parent company of Showtime. They said that Cinemax was being offered at below cost. In other words, HBO was suffering a loss to run Cinemax just so that they could undercut Showtime. Uh now, if you remember Showtime kind of Viacom also did this thing in the last episode we talked about, where it showed Viacom end up by aggressively undercut HBO. They essentially muscled HBO out of entire markets because they made this exclusive agreement with the largest cable provider in the United States at that time. So there's a little bit of a war going on. Yeah, a little bit of a oh yeah, so yeah, that's that's kind of the technical term. But Cinemax, you know, starts doing pretty well. And also in nineteen HBO has an affiliate in every single state in the United States. Now, if you listen to our last episode, you realize that's a big deal. This is the first time that any channel has been able to do that, and it is because they're using this satellite delivery system where the various cable operators across the United States have the receiver dishes that bring in the signal and then they can distribute it to their customers. So now there's an affiliate in every state. Remember, It started off justin Wilkes Bar, Pennsylvania. Then it's spread through most of Pennsylvania, then to New York, and then finally started to creep out into the rest of the United States. So big moment for HBO. All of this is allowing them to have a pretty incredible profit considering that they only hit profitability a year or two previously. Um. They their profits have grown from which again understandable because now they're they're available in way more markets. So the company is experiencing astronomical growth at this point because because once the cable operators decide yes we will carry HBO, that gives HBO the chance to target new customer bases that they had no access to before. Oh sure, um and there as a result able to offer their employees some pretty ridiculous benefits. Um It kind of the stories that I've read about it at the time remind me a little bit of what happened after the Facebook boom, um and and just that that tiny, free, free wheeling startup culture that turned into this very large, very freewheeling startup culture. It reminds me a lot of what Google attempts to continue to push at the Google Plex and of course, anyone who's worked in one of the satellite offices of Google probably is very familiar with what things, what what's available at the Googleplex versus what's available in some of those satellite offices. So there was also some tension between say HBO and the folks over at Time. Keep in mind that at this point they're still all working in the same building. They're working in Time Incorporate its headquarters, and so you had sort of these freewheeling young guys who are running HBO, who are having parties all the time. They said that essentially, the the motto at HBO is work, work, work, party, party, party and uh. And so you know, any excuse to get together and have a big dinner, and you know, they're still getting stuff done. But they also took a lot of time and developed this camaraderie. There's still some tension actually within the company itself because a very different culture existed between Time and Coorporated employees and HBO. Now in one Showtime makes a big move, which you could argue at the time, Time was mostly posturing. Uh. They decided to go to a full twenty four hour schedule, right because if you remember from our last episode. Again, at the time, these cable stations would sign off at a certain point every night. Yeah, like after midnight they'd say, all right, time, time to go to bed, because we don't have anything else we can show you. So showtime goes to twenty four hours, not necessarily being able to support that with enough content so that they're not incredibly repetitive, but HBO, not to be outdone, follow suit. So later on in they also become twenty four hour. Uh. And so you with anytime you wanted to turn on HBO it was three in the morning, you can turn on HBO and something would be playing. Uh. And then they end up also hitting the big time on one of those pre buy movies we talked about. Now, this is where HBO puts in money in the pre production phase for a movie and in return, they get exclusive rights to show that movie on HBO for a certain length of time. And in this case, they hit the jackpot. Now, it's not a movie that I think a lot of people are going to be rip roar and excited about, but it was a critically acclaimed success. It was on Golden Pond. Yeah, it won multiple Academy Awards. YEP. So this exclusivity was a big deal. It was a movie that people had heard about, they knew that it was award winning, and HBO was the only place you could see it outside of the theater. Keep in mind, this is before the home video craze starts, like, this is really before the VCR has taken off, So HBO exclusivity in this case was really important. Now they started moving to these output deals, which is when a pay TV service agrees to take on all the movies made by a certain studio over a certain time span. Again, tends to be kind of a grab bag situation. You might get a few big hits, you might have some mediocre films in there that you know, some people care about but most people don't. And you could have some outright flops. So a little bit of a risky situation. There's also this idea of a multi year agreement which HBO would have agreed to pick up a certain number of films the studio would produce over a given period of time, but have a little bit more safe which one like you made. We want twenty movies that you guys are going to make over the course of the next five years. Yeah, so once the five year period starts coming up. You're like, well, now we're stuck. Yeah, but but we got to be choosy at the beginning. Either way, these exclusivity deals were really really expensive, and it meant that it was tough to to make a profit unless you continuously grow. Now, at this time that wasn't a problem because cable was still entering in lots more markets, which meant you had access to brand new customers. So in the early days kind of automatically growing. Yeah. Yeah, you didn't have to worry about about boosting your your customer base so much because people were still eager to join. It wasn't until a couple of years later that things got a little tougher, but we'll get there. So companies were paying these big bucks for exclusive rights to movies for just a couple of years. Eventually those exclusivity rights would expire and those movies could be carried on other pay television stations like Showtime could pick it up. So in the long run, you would have a bank of movies that was essentially identical to your competitors. So for a couple of years you'd have exclusivity, but it wasn't a long term You would wind up evening out. Yeah. So yeah, one of those things that that you know, they really had to look at a little bit later because it was just it was not the best way to continuously grow your revenue. Now three, we get one of my favorite stories. Yeah, yeah, okay, this this is a big one. So so twenty century Fox negotiated to get Star Wars onto pay TV. Yes, so Star Wars big movie in ninety seven. Of course, that's when Return of the Jedi came out. So the original trilogy, you know, the only one that exists, is complete at this time. And Star Wars itself, the movie that started it all. Uh, the second big blockbuster following Jaws from Live is available to go on to pay TV. However, it's not an exclusive deal. This is something they they negotiate to put it on every page television station essentially, so Showtime's gonna get HBO is gonna get it now. Normally, the way these channels like to try and and position the big ticket items that they get is to wait and put it out on prime time preferably like eight pm. Yeah, Friday, Saturday, Sunday night, Sunday night, probably preferably to to really get all of the home viewers in right, so you would you know when the weekend would come around eight pm. That's when you could be guaranteed that that was when the biggest movies were going to be uh showcased on these pay television stations. However, Star Wars was such a big deal, being that summer blockbuster, that both Showtime and HBO wanted to make sure they took advantage of it and did not allow the other channel to show it before they did. So HBO didn't want Showtime to show it first. Showtime didn't want HBO to show it first. According to the agreement they signed with Fox, neither could show it any time before six am on February one, So both of them scheduled the first showing of Star Wars to be six am, February first, even knowing that that's not an ideal time for their customers. They just didn't want the other one to get the scoop, and HBO went a step further. So remember in that last episode where I talked about cable being a cutthroat business and nothing is really you know, off limits, that includes bribery. That's probably a strong word. HBO didn't bribe twentieth century Fox. Well they paid them more money. They paid them more money. That's very much like a bribe. Yeah, so that they could be allowed to show Star Wars one minute after midnight on February one, so six hours before showtime could although they weren't allowed to announce it. Yeah, so you had to have been watching HBO at one midnight after midnight on February one to have noticed that this had happened. However, the they were able to say legitimately that they were the first to pay television station to carry Star Wars, and that actually carried some weight. There were people who said, wait a minute, why is HBO showing it before showtime? I should have HBO not showtime, despite the fact that we're talking about a six hour window when most people wouldn't be watching television anyway. Um that that part didn't matter. So very interesting that this battle happened. It was another expensive battle, but an important one. As we all know, Star Wars one of the most important pieces of art created in the history. There's like the Mona Lisa Star Wars David, that's the order it goes in. So three also was there another amazing piece of art premiered on HBO and original program aimed at children. Yeah, Jim Henson's Fraggle Rock yep down in Fraggle Rock. So I was a huge Fraggle Rock fan back in the day. Um. They actually came to dragon Con and we covered the dragon Con parade. We actually shut this coverage. Me and Ben Bowen and Lauren You were there and we did it like Macy's Thanksgiving Day Parade style. It never it never saw the light of day, probably because there were long stretches where nothing was happening. We we we haven't had anyone had time to edit the whole thing really long. Yeah, but were in it. They were in it. And there is a photo gallery that I did. I was running a still camera through the parade and so and and she she waved at me. Yeah. I got choked up. Yeah, I got choked up watching the Fraggles. I mean, I'm not I'm not embarrassed to admit it. The Fraggles are meant a lot to be I'm getting a little tiory right now. In fact, all right, Well that was the first segment of HBO Story Part two. We've got more chapters here. The Game of Thrones, I think I guess we'll find out, but first let's take a quick break. Now, Jim Henson had already had a relationship with HBO. HBO had produced a couple of years earlier a Christmas special, immitt Otter's jug Band Christmas. So now Jim Hinson had the the freedom to create this entire children's series, which lasted five seasons, and it ended up being a big success. It was one of the few breakaway successes of children's programming on HBO. A lot of the other programming UH people liked the idea of but no one ever bothered to watch, so Fraggle Rock was not among that. That was an incredibly popular show, in fact, so popular that HBO would end up making other versions of Fraggle Rock for other countries, and some of them would have their own version of Doc and Sprocket that wouldn't necessarily be called Doc and Sprocket, and they would be different people, like the I think in England it was like a lighthouse keeper who was really crabby. But anyway, they would also be dubbed into different languages, so everyone had their own version of Fraggle Rock, which was kind of cool. It wasn't just a you know, it wasn't just switching out the soundtrack. It was actually Taylor made to These Nations and another series that premiered that year, and I remember the series too, was not necessarily The News, which was kind of a news parody sketch comedy show. It was the news thing was kind of the the conceit the book ends for these various sketches that may or may not be very loosely connected, right, And it was kind of Brian's very first television writing gig also uh, not consistently very good, but but one of the examples of HBO getting into original programming, which is again they started looking at how to differentiate themselves from the showtimes of the world, and these exclusivity deals, like we said, could be really really expensive, so maybe making original programming would have been a better approach. Now they learned that making good original programming is very tricky. It might not be expensive, but it's very hard to do, and getting people to pay attention is also sometimes tricky. Right. Yeah, Sometimes they would make an amazing show that the critics loved in nobody watched. We will talk about several of those in our third episode. But meanwhile, twelve years after its inception, HBO finally got their own offices. Yeah, they moved over into a building on Avenue, and it had the nickname the flash Cube. All right, kids years ago, like in the eighties, cameras which had film in them, none of this digital stuff also had flash you know, flashes, like a separate flash unit that you had to attach to the top little cube that would flash light so you could get some light on that image you're trying to capture onto film. That's why it was called the flash cube because the building looked like one. So this building that looked like something you've never seen looked exactly like just just like that thing. So now you had a building where the actual departments could all sit together. The divisions were no longer divided. They could all be in a cohesive unit. So that amazing camaraderie they had developed back at Time Incorporated, when they had this kind of startup mentality went away. What's completely ruined. Yeah, suddenly they were physically closer and yet emotionally so distant. Um. It turned out that HBO was starting to become more of a business, less of this kind of startup entrepreneur approach and I had more of a of a corporate structure. Yeah, And it also was when HBO started to notice that growing as a business was going to get very difficult, they did what was called hitting the wall. The wall in this case was saturation. You had a saturation point where cable had pretty much entered all the markets that was gonna go into. So that meant that you no longer could expect to suddenly have access to twenty thousand new subscribers potential new subscribers because someone finally built the infrastructure out to this one region. Now all the regions pretty much had cable, so there were not going to be any of these these gift baskets of potential customers just arriving at HBO. They were gonna have to work for it. And also on top of that, they had a churn rate going on, right. So churn rate is when you lose a certain number of customers over a course of a general amount of time. So there's was about two per month back in which means that in order to just stay even, you have to grow by two percent, right to to just maintain the same number of customers from the beginning of the month to the end of the month. If you want to grow beyond that, then obviously you have to get more than two percent new customers to replace the two percent who who left. Now, some of the people who left they left because they were relocating and eventually maybe they come back, but some of them were just saying, oh, I don't want to have this expense anymore. So you had to convince them, hey, we're worth the money, or you had to convince new people, hey, we're worth the money. And now there were fewer new people to get access to. So this was a very scary time at HBO. You had this young company that had been used to this incredible growth suddenly realizing, oh, things are not going to be as easy anymore. We're not going to have this essentially blank check that we can hand out for these exclusivity deals. We're not going to have this this endless line of new customers coming in through the door. What are we gonna do? And in fact, one of the first things they had to do was layoff about a hundred and twenty five employees, which was the first time in HBO's history that people had been let go like that. Also, around the same time, the VCR became a thing, and that was a boy talk about a big bite out of the business. So keep in mind, remember this is the time when HBO their main purpose was to create way for people to watch these movies that were uncut and uncensored that wouldn't be carried on broadcast television. But now, with the birth of the VCR and the growth of the home video market, where you could go to a rental store and rent a movie, you can get access to all sorts of movies beyond the what we'll call the playlist that HBO had access to. Remember, HBO is paying licensing fees to be able to show these movies, so they don't have licenses for every movie. They have to pick and choose, and sometimes they pick before they even know what the movie is going to be like, and sometimes they lose out on that. Oh sure, and they can only air so many things at a time, They can only pay to keep so many things on the air at a single time, and whatever they happen to have might not be what you feel like watching. Once once stores started carrying rentable VHS tapes, it was I mean for for younger listeners, I mean, like I have a hard time imagining this and I remember VHS tapes. I remember all of that very clearly, and it still sounds crazy to me that you that there was a time when you couldn't just watch whatever you wanted. Yeah. Now, you would go into the store and you would hope that that one copy of Young Einstein was still available, because you know what a breakaway hit that was. Um, hey, that was an important film. Hey, yeah, who's serious one of my heroes. Okay, I'm not don't take any thing away from the series, but yeah, just just the fact that you go into the store, you know, and hope that the thing is the movie that you want is there. There was an illusion that you had a more choice with the home video market. Now, the true was dependent upon how many copies of a certain movie the rental store had and how big a customer base it had, because there might be some movies that, unless you just looked out, were constantly being checked out. So so it seems even if Blockbuster had thirty copies of whatever it was, it might all be gone right. So so hypothetically you had a much larger choice, but in practice it may or may not have happened. And either way, it was probably more than just Beast Master over and over. Yes, HBO started getting the There was a joke that HBOS actually stood for Hey beast Masters on um. Yeah, that that was the That was again a comment about the repeats UH and UH, which were the movies that had been shown multiple times within a certain licensing period, and returns, which were movies that were still under license but had been pulled out of the circulation of movies shown on HBO and then reinserted later on. So you know, HBO licensed out these movies and those licenses were very specific. They would say you can show this movie X number of times and during these times of day, Like, they were very the way you had to program and HBO schedule was dependent upon these licenses because some of them were like, Okay, we don't want you showing this this movie before six pm. Well then they would have to plan that out, you know, before six pm and after midnight. I'm sure that FCC regulations and stuff like that would prevent some content from being shown during HBO specifically police themselves and put they would not allow anything that was R rated to go on before eight p m. So it had to be after eight pm to to go onto HBO Uh, there was largely a self imposed rule, and it was just an easy one for them to to go with because they knew that that would be something that would most likely fit their subscribers desires and would at least mollify the kind of groups that would have had complaints otherwise exactly most of them. Yes. So anyway, those life since has put limiting factors on HBO how many movies they would have access to it a given time, how many, how frequently they could show it. But then HBO also had this model, this business model, where the idea was, we're going to get this pool of movies. We're gonna make a schedule where we're going to show these movies at different times on different days, so that our customers can look at the schedule and say, oh, the movie I want to see is gonna be on at six pm on Wednesday. I'll make sure to watch it on Wednesday at six pm. But instead, what they found that was that people were treating HBO like it was a television channel. That's ridiculous. Well, I mean, you know, once again, once BCRs entered the picture and they could just record something, yeah, it didn't matter so much about when it was on, but they and also yeah, someone would just turn on the TV and just be like, oh, what's on right now? Okay, yeah, oh it's beast Master again. Yeah. That was the problem was that people were not treating it like the way the company had thought of the service and we the movie theater, which yeah, exactly. We've seen this happen in other industries, right, We've seen it where someone creates a service, let's say Twitter, great example, someone creates a service and they have in their mind the way the service is going to be used by the customers, and customers go, oh, this great thing for this entirely different purpose. And so if you're a good company, you move with the customers and you don't try and force them into a model that they don't want, because otherwise your your business suffers. So HBO started seeing, oh, we're gonna have to think of some other way to change up our programming so that we don't have the same you know, list of movies showing so frequently, because we're going to end up driving customers away. And we're already having to deal with this churn issue and the saturation issue. So all of these factors we're going into HBO and the executive's minds thinking all right, we gotta we gotta think of a new way of approaching content. Meanwhile, Michael Folks, who we had talked about in the last episod So, who had come over from a talent agency and had joined HBO. He becomes the head of HBO. He replaced Frank Beyondi, who had pretty much been forced out. He had made a really expensive licensing agreement with Columbia Pictures. Uh, there's a little movie called Ghostbusters that nearly broke the bank for HBO. We're talking like millions of dollars, like forty million dollars just to have this one movie because they had agreed beforehand, before knowing what this was going to be, and there was no cap on how much they could spend. So that deal pretty much melt the in for Beyondi. Yeah, well that that was. That was the first place that I saw Ghostbusters. So wow, I saw it in the theater opening day. The librarians, what are we? I was two. We've got more to say about this chapter in HBO's history, but before we get to that, let's take another quick break. All Right, We're up to nineteen five and that's what HBO decided to launch a big summer advertising campaign. Now. They they saw that the wall had hit, They saw this saturation in churn issue, they saw the exclusivity issue, and they thought, how can we attract more customers so that we can continue to grow, And they decided that they would really concentrate in an advertising campaign that spanned the summer of n and they would repeat this a couple of times. Oh yeah, yeah, and why the summer, you ask. Summer is a when kids are out of school and parents need something to do with these suddenly free tiny humans. Yeah, most of us have to continue to work in the summer months, and so how do you keep the tiny humans from rising up against their masters and enslaving us all good HBO. Furthermore, as most of us know, summer is when many television shows are in reruns. All of the all of the really big primary prime time sort of things are broken for the summer. Yeah, broadcast television is tends to be pretty pretty barren over the summer, like you're either watching reruns or especially just don't care about especially back in those days. These days, it's changing a little. It's a little bit. It's a little bit now where you can get interesting programming. Yeah, especially now that you have shows that are dividing their seasons up into season breaking bad, you don't don't perpetuate the breaking bad problem. I mean, breaking bad great show, but you know, splitting up your seasons, oh bad, breaking bad bad? All right. But anyway, Yeah, HBO decided, hey, we we can take this opportunity to really grab this this audience that doesn't yet subscribe to HBO. So what they did was they sent ads through direct mail and they also did telemarketing. They called people, cold calling people to convince them to sign up, and as irritating as it was, it was worked. Yeah. They sent six hundred forty million ads to folks between six billion, twice the population of the United States. They also did start investing more in original programming. Yes, um, and and you know, sports was something that they had been doing since the beginning. Yeah, that was one of the you remember the two things you could watch an HBO when it premiered was a movie, uh that that was about logging and a hockey game. So sports had always been part of HBO. Also, stand up comedy specials had been a part of HBO since the early days. Oh yeah, yeah, those really great old rap and Williams or Richard pryor special. Steve Martin had a good one too. Yeah. You had a bunch of people who were the the kind of the loudest voices of comedy in the seventies and eighties. George Carlin another one. Some amazing comedians who would get their HBO special And even to this day you'll hear comedians talk about, you know, feeling like they made it when they got an HBO special like that. That was like a mark of success. You know, that's when you know you've you've arrived. They continued to do that, so stand up comedy also big. They also ended up backing several documentary series. They ended up creating several series, including a brand called America Undercover. There are several documentaries in that series, and that helped to differentiate them again more from the showtimes in the world. Now, keep in mind Showtime at this point not really getting into original programming that much. They were still very much dependent upon the uncut, uncensored versions of movies. HBO was trying to kind of break away from that a little bit while still having movies on the channel, but trying to differentiate themselves by adding variety that you could not get anywhere else. A right, right, it's a little bit, if you remember from our cable provider and streaming media discussion, or I mean, if you pay attention to the Internet these days, a little bit of what what Netflix is doing to kind of try to move itself forward in front of channels like HBO. In fact, if HBO had not done this, we would not have a Netflix, and we certainly wouldn't have a Netflix that's making its own content. Same thing with Hulu, same thing with am is on. The reason why they're able to make their own content, why that's a viable choice is because HBO tried it and made it work. Now, not everything HBO did with the independent stuff that they did, the original programming stuff worked and we'll talk a lot about some of both the successes and the failures. Um, not everything caught on. However, they also partnered at that time with a company called Thorne E m I, which was an independent film producer and video distributor. So their main business model was to partner with other movie studios that did not have a home video distribution market. So some of the big ones did they They had They had it all in place where either they had their own production company or distribution company or they partnered with someone already. Thorny and I would would partner with lots of smaller, smaller distribution companies. So they ended up getting a lot of um we all those cheap action movies, you know, the ones that started Internet, Darling, Chuck Norris, those were big ones. But uh. The following year six, Cannon Pictures bought out thorn em I's interest, so HBO and thorny em I had um HBO and thorny Emi had partnered together. Cannon Pictures comes in buys out thorn em I, but still partners with HBO and it becomes HBO Slash Cannon Video and again most of the movies low budget action films, awesome movies, not taking anything away from him. By seven, HBO Cannon ends up being renamed HBO Video. Short time later, it changes names again to HBO Entertainment and they had a few successes, but really it was touch and go for a while. It wouldn't be until HBO original programming really took off in the nineties when HBO Entertainment had it made. Because now they became the distribution for HBO originals that everybody wanted to have, all right, but at the time it was really just scraping by. Moving on to Night six, that's when HBO established HBO Showcase, which was an actual production company. So they had already moved into distribution, and they had a production company over on the West Coast in Los Angeles called HBO Pictures, but now they wanted to create another production company on the East Coast, so this one was based in New York. And the idea was to make grittier, more you know, kind of realistic or hard hitting movies than HBO Pictures was known for. So their first picture was about a KGB agent who was involved in a big CIA operation. This was actually a true story about Uri Nasinko. So they they were going kind of this this hard, gritty route, and in general people said it felt more like HBO, whereas the stuff from HBO Pictures a little more you know, glossy and glitzy. Certainly had bigger budgets, had access to bigger names, so you saw more movie stars in HBO Pictures productions, but the HBO Showcase would be the kind of more down to earth stuff. So both of these would eventually merge together and become HBO Films, and Colin Callender, who had been the head of HBO Showcase, became the head of this whole department. I'm sure there were some grumblings on both sides. I'm sure the the the Showcase folks were thinking, you know, they get all the money and they get they get access to all that talent, whereas the pictures folks were probably thinking, they have this crazy reputation, which we should have because look at what we're doing. So so everyone get together and play nice. Yeah. Uh. Fortunately they were separated by the rest of the United States, with one being in l a and the other being in New York, so I think they could. They were insulated enough where it wasn't too much of a problem. Also in now, this is another big moment in HBO history because it established a practice that ended up becoming an industry wide standard. It's another reason why we really wanted to talk about HBO at length, because so many of the things they did influen inst multiple industries. In this case, they began to scramble or encode signals full time for those satellite signals. Now, if you listen to the first episode you learned about HBO using up links to send a signal up to a satellite, which used transponders leased by HBO to amplify the signal send it back down to down links across the nation to cable providers, because it spread out over the entirety of North America, and at this point, the cost of purchasing a satellite dish for yourself head lowered to the point where where common families could purchase one if they wanted yea, if they if they saved up. I mean, even back when it was still tens of thousands of dollars. You had a few crazy people with lots of money buying these things because the signals weren't scrambled, the signals were clear. So so once you bought in what i mean for for the purchase price of that satellite dish, you could watch whatever you wanted to absolutely free. And so pay TV stations didn't like this because you didn't have to subscribe to cable at all. Cable companies didn't like it because you didn't have to subscribe to cable at all. You just had this dish, which at the time was enormous. Uh. This was before they had developed the the dishes that are more common these days. This is when if you remember back in the eighties, the enormous satellite dishes that might be out in front of someone's yard or in the backyard. That's what I'm talking about, the big like nine footers. So you're able to get these signals clear. And not only that, broadcast television hated it. And you might think, well, why did broadcast television hate it? You could get those shows for free using an antenna. Well, it's because those shows aren't really free. The reason why those shows are are possible at almost because their ads supported, right, advertisers by advertising time on those shows, and that money goes to the production companies. They are more steps in here, but in general, the production companies are able to make shows because the money made through advertising. Well, if you're using a satellite to pull down the raw feed, you're getting the raw feed, you're getting what's called the back hall feed, which is before they put any commercials into the content. So you were getting commercial free content from all the different providers, something that broadcast and cable stations and cable providers all hated. So how do you fix this problem? Well, what HBO decided to do was to invest in this encoding and scrambling technology. They ended up going with General Instruments Video cipher to to encrypt the audio and video signals. Once they've done that, you'd have to have a decryption box on the private end in order to decrypt the signals. Right, So cable companies had these D scramblers, Right, they can just descramble it, and they had an agreement with HBO. Originally it was just HBO, but other other channels would follow suit. So HBO ended up, like I said, creating this industry standard approach. So the cable providers would all have these D scramblers. And as a private citizen, you could get a D scrambler, but uh, it wouldn't necessarily work. You'd have to pay HBO to have access. You could actually go out and buy chips that would decrypt things for you, but often these chips would only be good for about a month, and what would happen is that the provider on the other end would see that someone usually it's some fake address that's been made out to a customer has not paid their bill, and so they cut off the service. So for a month you have service and then suddenly you don't. So people kept trying to find ways to get around this, but it meant that for the most part, it was much harder to pirate a signal. Now this made satellite dish owners very, very angry. They felt entitled to the stuff they were stealing because, in their minds they had paid thousands of dollars for a Sally dish, therefore they should have access to all this content, despite the fact that all the content providers are saying, yeah, see, the money you spent didn't go to help pay for the actual content, and unless we get paid for the content we make, we can't make it. So you're actually talking about a behavior that ultimately will completely destroy the business that you want to to enjoy. You want this content, you want to be able to watch stuff, but if we're not getting money for it, we can't make the stuff you want to watch. But the satellite provide satellite owners said, I want my free HBO. So Jonathan has some opinions. I don't side with the pirates on this one. To be honest, I understand. I understand the other arguments, which we'll get into when we talk about streaming. I'll you know, it's not that I don't feel empathy for folks who want to have access to content. It's just that if you had the choice of either spending thousands of dollars for a satellite dish and then stealing everything or just that that is a different issue. And it's a little bit on the silly end um. But meanwhile, also in six uh, Jeff Bukes became HBO's chief financial officer. He wouldn't be finished rising the ranks because if you listen to our last episode, we kind of gave it away. HBO launches Festival. This is gonna sound like it's a like it's a Dejah all over again. All right, right? Remember take two? Yeah, that was the idea of creating a kid friendly network that was lower priced, so people who weren't either willing to pay the full subscription price for HBO or objected to the content would have an alternative. It also did not work. Yeah, apparently they didn't learn anything from Take two because Festival to me sounds like it was the same thing, exactly the same thing. Yeah, it would it would find up getting canceled entirely than a year. Yeah, the problem was that they were trying to target two different populations. They wanted to target the conservative older people who didn't want all that filth on their TV, and they wanted to target families with young children who wanted to have kid friendly programming. But the problem was all the older conservatives said, why do you have all this children programming on my station? I don't want any of this. This is not interesting to me. And all the families were saying, I got this channel so that I could watch stuff and my kids could watch stuff. But when my kids have gone to bed, the only stuff you have on is on Golden Pond times in a row. I don't care about that. So neither target audience was satisfied. So it's the lesson here is if you want to target two very different audiences, splitting the difference hardly ever works. Yes. Um the next year though in Something with Kids did work out. Yes. The Kids in the Hall in fact, premiered on HBO Canadian sketch comedy Troupe Brilliant, one of my favorites seen him live, Good stuff. And that wraps up the HBO story Part two. Next week we will have the part three of the story, and again Like I said, a lot has happened in the years since, so I'll probably have to do an update to this at some point and talk really about how HBO and Warner Brothers have really transformed the entertainment space, particularly in a world that went through a pandemic that really shook things up in a big, big way. But that'll have to wait in the meantime. If you have any suggestions for topics I should cover in future episodes of tech Stuff or ones that require an update, let me know. The best way to do that is to reach out on Twitter and the handle I use is text Stuff hs W. Next week we're gonna have part three of this, so stay tuned for that and I'll talk to you again really soon. Text Stuff is an I Heart Radio production. 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