This is one of 186 strategies and applications that will appear in Putting Your Small Business on Steroids — 186 Strategies to Increase Your ROI, by John Gifford and Matt Hall.
Turner was not finished building content. He was already airing many movies on Channel 17 and had in mind new stations that would showcase even more. He looked to MGM for that content, mostly from the film library, but there was also a part of him that yearned to be the owner of a movie studio. If he owned the movies, he wouldn’t have to pay the rising rentals fees—he would use the content on his own stations and be collecting syndication fees from others. After much negotiation and angst on the part of both Turner and his company’s board, Turner Broadcasting bought MGM on March 25th, 1986 for $1.5 Billion. However, he almost bit off more than he could chew. In fact he sold sold back to the seller Kirk Kerkorian the MGM studio, video business, and the MGM Lion logo for $300 Million; sold the studio lot and film laboratory to Lorimar for $190 miillion; but, he kept the film library, for which he still owed 1.2 billion dollars.
1986 and 1987 were tough years for Turner Broadcasting, so tough in fact that he had to sell considerable stock in his company in order to meet the financial obligations of the MGM film library purchase. However, the sale of the stock was to a group of 31 cable owners, whose fortunes became even more tightly bound with Turner’s. Even the stipulations that this consortium made on Turner eventuated in a win-win situation (except for tying Ted’s hands above the $2 million mark) for both Turner and these cable companies. Although Turner kept 51% of the company, the cable consortium received 7 of the 15 seats on the company’s board and Turner could not make an expenditure over $2 million without 12 of the 15 members on the board approving.
If Turner could convince his own board to approve a new station or network that he proposed, he had in effect convinced the key cable owners controlling the majority of subscribers in the U.S. The launch of TNT was virtually agreed upon before the actual surrender of power to the board, and its logic was amply borne out by its rapid growth. On 10/3/88, TNT started with 17 million viewers (vs. CNN’s 2 million), and reached 50 million within a year. Turner’s previous success and “insider” position with the cable owners made subscriber ramp-up easier with each succeeding network. TNT’s content consisted of Classic movies from the recently purchased MGM film library (which Turner “colorized” to the consternation of aesthetic critics, but to the high-profit delight of his accountants) and high profile sports (primarily baseball and basketball).
The seemingly high-priced MGM film library began to pay back immediately. As key content for the newly-launched TNT and with its syndication profits, the film library began to yield dividends almost immediately. Within three years, the combination of TNT and the syndication revenue stream were projected at a worth of $1.6 Billion, $400 Million more than the library’s purchase price. And, the cable owners were even more committed to Turner. TNT, WTBS, CNN, and Headline News subscribers represented one-third of all cable viewers. In 1989, Turner Broadcasting was worth $5 Billion.
The combination of Turner and the astute, less mercurial board provided a stability, a structure, and a systematic accountability for Turner Broadcasting that it had never experienced before. However, this was really the high-water mark for Turner Broadcasting, because the outrageous and ingenious innovations that were Ted’s hallmark were now reigned in by the board. Other stations were added to the company, but the audacious growth cycle that Turner had pushed since his taking over the billboard-based company in 1963 was curtailed.
From the time of the cable consortium’s purchase (Ted’s father always told him to keep control of his company), Turner no longer had the entrepreneurial freedom he relished before, and his interests turned to other areas: political issues, eco-matters, and global considerations. The Golden Age of Turner had passed. He allowed Turner Broadcasting to be purchased by Time Warner in October 1996, about which he agreed with Viacom-CBS mogul Sumner Redstone that selling Turner Broadcasting to Time Warner was his downfall. Even though he remained as a Vice President with Time Warner until January 29, 2003, his influence and degrees of freedom were severely curtailed in his executive position.
(Ted Turner: To be continued)
This is one of 186 strategies and applications that will appear in Putting Your Small Business on Steroids — 186 Strategies to Increase Your ROI, by John Gifford and Matt Hall. If you would like to be notified when the book is available, please send an email with the Subject: Book Notification to johng@indysmallbiz.com.
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