Discovery Channel and Curiosity Stream: John Hendricks

In the 1980s—the early days of cable television—John Hendricks got stuck on an idea he couldn't shake: to create a channel that would teach people cool things in an entertaining way. In college he had seen hours of documentaries on history, science, and outer space; and he figured if he was interested in them, others would be too. So around the age of 30, he left a comfortable consulting business to begin a delicate juggling act: leasing a satellite, licensing content, and wooing cable distributors, all the while pounding the pavement to finance it all. Today, Discovery reaches more than 400 million homes around the world, and John is still in the content business, having launched Curiosity Stream in 2015. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Guy Raz?

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• 4:23Guy Raz?

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• 5:07Guy Raz?

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• 5:13Speaker 01

  I remember we had a meeting. You know, we told everyone, bring your ideas. And so we were just going around the room. It was the classic, what if me? What if we did this? And this young programmer, Steve Cheskin, and he said, what if? He said, you know how independent TV stations have like Marilyn Monroe Week or John Wayne Week? He says, so they have theme weeks? And he just blurted out, I said, what if we had Shark Week? And we kind of all said, yeah. You know, they all kind of looked at me and I said, I think it's a great idea. The idea was as simple as that, but as profound as that, you know?

• 5:57Guy Raz?

  From NPR, it's How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 6:09Guy Raz?

  I'm Guy Raz. And on the show today, how John Hendricks broke into the cable industry with no money, no content, and no carrier, launched Discovery Channel, and grew it into one of the best-known brands on television.

• 6:27Guy Raz?

  About seven or eight years ago, I interviewed the writer Elizabeth Gilbert on another show I was doing at the time. The theme of the conversation was passion, as in, follow your passion. It's advice many of us have heard before, especially when we're trying to figure out what to do with our lives. "Just follow your passion," someone will say. Anyway, Elizabeth Gilbert kind of blew that whole show apart when she stated, in no uncertain terms, that for lots of people, that idea is horrible, in part because some of us may not have a passion that is remotely connected to making a living. And some people, well, they don't have any passions at all, and that's OK.

• 7:12Guy Raz?

  So instead, and I will never forget this, because this might rank among the best pieces of advice I've ever heard on one of my shows, Elizabeth Gilbert recommended not to follow your passion, but to follow your curiosity. And that is precisely what our guest today, John Hendricks, did. He was and is an intensely curious person, the kind of person who would pour through volumes of the Encyclopedia Britannica as a kid. He loved science documentaries that aired on public television, shows about the Earth and outer space and history. In the early 1980s, John was working as a consultant, helping universities write grant proposals.

• 7:55Guy Raz?

  It was around this time that cable television was just starting to take off. The early stations are ones we know today, CNN, MTV, HBO, ESPN. And John Hendricks, ever curious, started to wonder, what about a station that was all about knowledge? A channel that could produce and distribute the kinds of science documentaries he loved?

• 8:21Guy Raz?

  Now, trying to launch a cable channel today is daunting. But back in 1982, when John first had the idea, it seemed insurmountable unless you were well-connected and had access to lots of capital. Just to get your signal onto a satellite cost upwards of $350,000 a month. And that's after the millions of dollars it would take to generate the content. But at the time, John had neither the connections nor the money. He had no background in the broadcast industry and had never produced any content in his life. And yet, he set out over the next four years to convince investors,

• 9:05Guy Raz?

  satellite companies, content providers, and cable distributors, pretty much all at the same time, that they should take a risk on him and his idea. An idea to build a cable network called Discovery. Today, the Discovery Channel is among the most-watched cable networks. It reaches hundreds of millions of people around the world and is single-handedly responsible for making sharks one of the biggest draws on television. But as you will hear, the road to getting there was a slog. And in 1986, Discovery was literally days away from collapsing under the weight of mounting debt.

• 9:46Guy Raz?

  But before any of that happened, John was growing up in Huntsville, Alabama, in the 1950s and 60s. His dad was a home builder and his mom worked as an accountant. For college, John went to the University of Alabama, where he majored in history.

• 10:03Speaker 01

  For me, I mean, I just, I felt like, you know, you're going to be in college for four years. Why not read about things you're interested in? And I was always interested in history. You know, by the time you're a senior, you need to, of course, pick your major, European, ancient history. So mine was kind of a hybrid of American history and the history of science and technology.

• 10:25Guy Raz?

  So I read that while you were in college, you had a job in like the AV Center. And you, one of the things that you had to do was to get... Films for professors, you could get them like these sort of 16 millimeter documentaries or films that they were going to show in their classrooms, which clearly was going to plant a seed in your head.

• 10:44Speaker 01

  Yeah, it did. I just became aware of all these documentaries from the BBC, from Encyclopedia Britannica Films, Time Life Films, and many others. That made a big impression on me. And I just had this simple thought, so I must have been all of 21 years old, but my thought was, why can't this be on television?

• 11:04Guy Raz?

  Yeah.

• 11:05Speaker 01

  And, you know, from that, I made two phone calls, one to a local broadcast station, and they were just definitely not interested. And there was, cable was around, so this would have been probably around 1972 or 73, but cable was really a community antenna. There are a lot of places in America that couldn't receive a good broadcast signal either. They were down in the hollows, or they were in urban areas where large buildings would block that. And so there were cable operators. And in Alabama, there was the teleprompter cable system. I think it was the general manager I actually talked to. And he said, Son, this

• 11:47Speaker 01

  is a good idea, but you got to understand, we can't by law provide any content other than the retransmission of broadcast signals.

• 11:56Guy Raz?

  Wow. That's what cable did. Just retransmitted whatever was already being broadcast.

• 12:01Speaker 01

  Exactly.

• 12:02Guy Raz?

  Cable was literally a cable that enabled people to see existing television if their antennas couldn't get the broadcast.

• 12:10Speaker 01

  Exactly. Yeah. It was a large community antenna.

• 12:13Guy Raz?

  Yeah.

• 12:14Speaker 01

  CATV. And then from that community antenna, they would string coaxial cable to people's households.

• 12:22Guy Raz?

  To their homes. Yeah.

• 12:23Speaker 01

  Yeah.

• 12:23Guy Raz?

  You actually, while you were in college, you did a research project for the, I guess, for the Tennessee Valley Authority. And it actually got published, which I guess kind of led to your first job after you, after you graduated at the University of Alabama. They, they hired you and sent you to Washington DC, right?

• 12:43Speaker 01

  Yeah, so the fact that the Tennessee Valley Authority published my research paper that I did that summer, I was a published author. I mean, I got, was registered in the Library of Congress, for example. And so it got the attention of the president of the university. And he wanted someone to go to Washington, write grant proposals and bring back money to the university.

• 13:03Guy Raz?

  Huh, I know, I'm gonna, I'm sort of fast forward here for, for a little bit, John, because I know that that job, you did that for a brief stint, and then you essentially did the same thing at the University of Maryland, because you were already in the area.

• 13:16Speaker 01

  Yes.

• 13:16Guy Raz?

  And then that led you to start your, your, basically your own consulting gig, or business, where you were, you were helping other nonprofits and colleges write their own grant proposals, right?

• 13:28Speaker 01

  That's right.

• 13:29Guy Raz?

  And I think it was around that time, this is the late 70s, like maybe 78, 79, when you also met your wife, right?

• 13:36Speaker 01

  That's right.

• 13:37Guy Raz?

  The woman who'd become your wife, Maureen.

• 13:40Speaker 01

  Yeah, so we dated and then we married in 1981.

• 13:43Guy Raz?

  And the two of you met, I know that you called it a restaurant, but it was really a bar.

• 13:48Speaker 01

  Yeah, it was a disco in Washington. It was called The Apple Tree. They serve food there. So, you know, my, when I called my mother, my religious mom, she says, "Now, where did you meet her?" I said, "I met her at a restaurant."

• 14:02Guy Raz?

  Right. From, from what I understand, in your first meeting with Maureen, her pickup line was, "I work on acoustic propagation model, loss models."

• 14:13Speaker 01

  That's right.

• 14:13Guy Raz?

  Which you thought was fascinating.

• 14:14Speaker 01

  Which was, yeah, which was, but, and I knew a little bit about that. I mean, that was kind of surprising, but I had...

• 14:19Guy Raz?

  I don't even know what that is, but you, okay?

• 14:22Speaker 01

  Yeah, and so I said, "So you work on submarines?" And she said, "Yes," and she worked for the Office of Naval Research. And it was just fascinating.

• 14:31Guy Raz?

  All right, so you guys are together. You are working full-time on your consulting business, and...

• 14:39Guy Raz?

  This is probably a good business. Like, I imagine, was that, was your ambition to kind of grow this consulting business out and maybe make that your life's work?

• 14:49Speaker 01

  Yeah, it was. I mean, I had big plans for what that could become. So I started down that path, but I also had these local Washington DC area groups that I was meeting with. And then one in particular got me off thinking about television. And I think if you ask any entrepreneur why they do something, it's typically because they've become passionate about an idea or something at some point in their lives that they can't let go.

• 15:21Guy Raz?

  Yeah.

• 15:21Speaker 01

  It turns into kind of a healthy obsession, as I like to call it. And I certainly started my focus on television. Television, you know, television, of course, is important to all of us. But I think for me, you know, growing up, being able to connect to someone like a Walter Cronkite.

• 15:39Guy Raz?

  Yeah.

• 15:39Speaker 01

  And Walter Cronkite in particular was kind of, well, he was an idol of mine.

• 15:44Guy Raz?

  Yeah.

• 15:44Speaker 01

  You know, we were like many families. We got our news from CBS and Walter Cronkite every evening. But he went further. He loved science and technology and space. And so he did a number of series that I just relished every episode. He did You Are There, which was interesting. He, you know, pretended, what if you were there at the signing of the Declaration of Independence, or you were there at certain historical moments. And for me, it was that same question, why can't there be more of this? Okay, there are now starting to be some bright spots on broadcasting. And so my question is, you know, was why can't there be more of this?

• 16:21Guy Raz?

  Were you following the developments in the cable industry? Or were you just kind of a passive consumer of that news? Like Ted Turner founded CNN, I think, in 1980. You know, HBO had been founded already in the early 70s. Was it something you were paying attention to, or not really?

• 16:38Speaker 01

  No, I wasn't, you know, particularly studying, you know, the development of cable. There was a day, though, in 1975, I'd been at the University of Maryland for a little, you know, a few months, I think. And a headline. Above the fold was the Supreme Court decided that the FCC restrictions that prevented the creation of cable networks was not constitutional. And the Supreme Court held that anybody who wanted to start a cable network was a First Amendment speaker. And so that was this ruling, and for me, it connected again back when that question I asked that cable operator back when I was in college. And by that time, by the time

• 17:23Speaker 01

  the court hearing, the ruling happened, you know, HBO was up and it was just sweeping the country. The cable industry likes to call that era the era of truck chasers. People would see a cable truck come through the community and they would chase it to say, when can I get cable? But what they wanted was HBO. I mean, just the thought of having a different movie every night at eight o'clock that you could watch was revolutionary.

• 17:50Guy Raz?

  All right. So you've got the consulting business and mainly what you were doing, you were doing work for hospitals, universities, helping them kind of, you know, find funding. But I guess you had a, one of your, somebody approached you to work with them and it was a theology professor who had worked at American University who was looking for help to get a television series that he'd worked on to get it like wider distribution. First of all, why, before we talk about the series, why would he have come to you when this was not your kind of in your wheelhouse?

• 18:29Speaker 01

  Well, it was because initially he was trying to raise money to support his television efforts, his broadcast efforts. So it was a guy, a fellow named Ed Baumann. And what he was trying to do was to help Judaism, Christianity and Islam.

• 18:48Speaker 01

  To understand one another. So he created a series called The Children of Abraham. And lo and behold, the ABC affiliate in Washington agreed to provide him the studio space at no charge and support him. And so these telecasts occurred on Sunday mornings, very, very thoughtful. So he asked me if I could help them in fundraising.

• 19:14Guy Raz?

  Right.

• 19:14Speaker 01

  But then they said, could we get this more widely distributed in the country?

• 19:18Guy Raz?

  Yeah.

• 19:18Speaker 01

  And so then that's when I started researching in earnest, would, you know, could this be on public television? And then by that time, there was enough cable channels that had started. By that time, there was a cable news network. You know, there was a sports network, ESPN, that started in 79. And there were plans for music television, MTV. And so that's the development was, why isn't there a cable? At first, I was thinking, why isn't there an educational channel?

• 19:50Guy Raz?

  Yeah.

• 19:50Speaker 01

  Where this could easily play on. And then there wasn't one. And then you start spiraling into this, there's not one. Why is there not one? How could you start one? And then that started the process.

• 20:03Guy Raz?

  So you, you start to go down a rabbit hole. Did you, who did you first talk to about this idea?

• 20:10Speaker 01

  Well, the very first person was my wife, Maureen. So she, like me, she, we loved great documentaries. And I said, what if there was a channel that was dedicated to great documentaries? And she said, well, that's a great idea. And then she kind of paused. And she said, well, this is such a great idea. Why didn't Ted Turner think about it?

• 20:30Guy Raz?

  Yeah, right.

• 20:31Speaker 01

  And it was a good question. It was, you know, Ted was focused on what he was doing because he loves documentaries. You know, I've since, you know, being in the business, got to know Ted quite well. And he always thought it was such a mistake of him because he did have the idea for a news network. He just didn't go that next step of, well, what about, you know, long form news and documentaries?

• 20:52Guy Raz?

  Yeah.

• 20:53Speaker 01

  And I'm glad he didn't. So the origination of that idea specifically now about a channel was in around February of 82. And by that September, Yeah, I had incorporated.

• 21:05Guy Raz?

  You, you literally incorporated, I mean, well, so you filed documents for an LLC, which would be?

• 21:12Speaker 01

  Yes.

• 21:13Guy Raz?

  To start a cable network.

• 21:16Speaker 01

  Yeah, it was actually a company. I incorporated what I, I didn't know exactly what the brand name was, was gonna be, but, so I called it Cable Educational Network, Inc.

• 21:27Guy Raz?

  Did you talk to anybody? Did you, did you reach out to any professionals in the, in the industry to find out, like, is this even possible? How do you do this?

• 21:36Speaker 01

  Yeah, so, I mean, in that particular timeframe, it was mainly researching and reading.

• 21:41Guy Raz?

  Yeah.

• 21:42Speaker 01

  Just like, how do you create a channel?

• 21:44Guy Raz?

  Right.

• 21:45Speaker 01

  You know, okay, I knew the basics. You have to uplink a signal to satellite. There's 24 transponders on a communication satellite, each one processing six megahertz of spectrum. Each corresponds to a channel. So you can have 24 channels up on a satellite. And so I thought, if you're gonna be successful, I wanted to find out, where is CNN? Where is HBO?

• 22:09Guy Raz?

  Yeah.

• 22:09Speaker 01

  I wanna be on the same satellite. How much would that cost? But there was a time that, a little later on, that I was really going to people in the industry. And I started with Winfield Kelly, who was the general manager of the cable system there in Prince George's County, Maryland.

• 22:26Guy Raz?

  Which is where you were living.

• 22:28Speaker 01

  Which was where I was living.

• 22:29Guy Raz?

  Right.

• 22:29Speaker 01

  You know, talked to him about it. And he liked it. He thought that was a great idea. And he, he said, you know what, let me help. Let me set you up with a meeting with his, the parent corporation of the cable system. And he set me up with a meeting. And it was, everybody was encouraging. So I think people who are successful in business, they're kinda naturally curious people. And so I think- When I saw anybody I talked to, if they could see themselves using the service, then I could get to a yes.

• 23:02Guy Raz?

  Presumably, you knew that there was all this content out there that maybe you could capture. But, I mean, as you were doing the research and building a business plan, what did you find out about documentaries in general? How did you know there was a market for them?

• 23:16Speaker 01

  Yeah, there had been a number of polls on television research, you know, consumer research. And so I knew there was an appetite for it. There were the great experiences that we were all seeing with Carl Sagan and what he was doing on Cosmos. PBS had wonderful success with Kenneth Clark's series on civilization. I think, you know, there's 25 to 40% of humanity that's deeply curious. They really want to know, where do we come from? You know, how is our future going to be shaped by our past? Where are we in the universe, for example? So it's that audience, which had been largely neglected by what a lot of people had called

• 24:01Speaker 01

  lowest common denominator programming on the commercial networks.

• 24:04Guy Raz?

  Yeah.

• 24:05Speaker 01

  And so there was a wealth of programming, you know, in comedy and entertainment, because that appealed to 60, 70, 80% of the people, but not a lot of content for the 40%.

• 24:16Guy Raz?

  Here's what I'm wondering about, John. I mean, you start to really do a deep dive into this world while also running your consulting business. So this is presumably like occupying your nights and weekends, this kind of obsession. You are working on a business plan. You were in like early 30s, I think you were 30 or 31 at this point. And in your business plan, from what I've read, you determined that in order to launch this cable channel, that, you know, right now you'd called it, what was it called, like?

• 24:47Speaker 01

  Cable Educational Network, Inc.

• 24:49Guy Raz?

  Right. But in order to launch it, you would need... Twenty five million dollars, which I understand in television terms is nothing, but that sounded like a lot of money. I mean, you are not an independently wealthy person. You did not come from family wealth. You had a decent consulting business. When you came up with that figure, I mean, weren't, how were you not intimidated, overwhelmed by that prospect?

• 25:16Speaker 01

  Well, it was extremely intimidating. I mean, just doing the research, it was clear that I would have an expense rate of at least a million a month. Okay. And the big portion of that was the satellite transponder and uplink, which as I recall, was around three hundred and thirty, three hundred and forty thousand dollars a month.

• 25:34Guy Raz?

  Due to pay three hundred, just to rent the satellite transponder?

• 25:37Speaker 01

  Yes, just to lease. And so soon as you make a call to RCA, Americom at the time, or Westinghouse.

• 25:45Guy Raz?

  That owned, these are the satellite owners?

• 25:47Speaker 01

  Yes. For them, it's about a two hundred and fifty million dollar investment to build and launch a satellite.

• 25:53Guy Raz?

  Yep.

• 25:53Speaker 01

  And so when I called Westinghouse, they were eager for me to be successful. So not only were they calling me every month, have you made any progress raising money?

• 26:02Guy Raz?

  Right.

• 26:03Speaker 01

  Figuring out the business plan. And so the more experts I talked to, it became a little more real because I knew there was a satellite transponder that I could, I could lease.

• 26:12Guy Raz?

  You could rent.

• 26:12Speaker 01

  It was, it was lease. Westing says, we'll hold this for you until you get your money ready.

• 26:17Guy Raz?

  Wow.

• 26:17Speaker 01

  That way then I could talk to investors. And their first question is, how are you going to do this? And I said, well, I have the satellite pathway. We know that it'll reach at least twenty two million of the twenty six million cable households. You know, so I started to have these details, you know, of the business. But you're right, I knew we would need a minimum of twenty five million, a little over, say, two years of operations.

• 26:43Guy Raz?

  I mean, you are, there are a lot of moving parts with this idea that you had. You, you had. To get on a satellite, which was going to be really expensive, you had to source content, which, I mean, you knew, for example, that the content side was relatively easy because you'd worked in the university library as a student and you knew that there were all these documentaries just sitting on shelves gathering dust. So, that's another challenge, but probably less challenging than the satellite. And then you had to have a revenue model. I mean, while you were building this business plan and talking about it with your wife, was there ever a point where she was like, this just seems like it doesn't, it's so complicated to make this happen. Like, are we really sure

• 27:28Guy Raz?

  we want to go into this?

• 27:29Speaker 01

  Yeah, I mean, there's always times you have doubts and there's some moments and times when you get almost in a crisis mode about the financial underpinnings of whatever your venture is going to be. But I was just always grounded and had confidence if we could just get on satellite, people would respond favorably to it. And that was just my mission. What will it take? But you outlined, I mean, it was a puzzle. It was a puzzle.

• 27:58Guy Raz?

  When we come back in just a moment, how one of the biggest pieces in that puzzle, a $6 million investment in John's new channel, slips through the cracks at the 11th hour. Stay with us. I'm Guy Raz and you're listening to How I Built This. Does your team want a website that looks and feels handcrafted but is still fast to ship? Well, Framer is built exactly for that. With Framer, you design on a visual canvas with responsive layouts, hosting, and a CMS built in. So the work is production-ready from day one, and you can get it done with help from Framer's AI agents. Framer is the

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• 30:06Guy Raz?

  That's why NetSuite wants to put a new expert-created business guide in your hands today. It's called Aligning for the Agentic Era: How AI is Changing Everyday Work. And right now, it's yours, absolutely free. Inside, you'll discover how AI could reshape work across your entire organization and how to position your business to prosper from it. If your revenues are at least in the seven figures, get NetSuite's free business guide, Aligning for the Agentic Era: How AI is Changing Everyday Work, at netsuite.com/built. The guide is free to you at netsuite.com/built. netsuite.com/built.

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• 31:27Guy Raz?

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• 31:49Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's 1982, and John Hendricks is basically going through the checklist of all the things he is going to need to start his new cable channel.

• 32:04Speaker 01

  First, you have to have the distribution infrastructure, which is the satellites. And I talked to Westinghouse, and I saw, OK, that's a solvable problem with money.

• 32:13Guy Raz?

  Right.

• 32:13Speaker 01

  OK, so the money is the problem. Then you said, well, even if you have the greatest idea you think, and you can put it on satellite, will cable operators actually carry it? And so that's when I would make phone calls and call cable operators. And they were all supportive, but then there would always be a challenge. It would be something like, John, we love this idea, but we don't have any money to pay for it.

• 32:36Guy Raz?

  Right.

• 32:37Speaker 01

  Or regulate it. And so maybe someday. And they were all kind of pinning their hopes on the Cable Act of 1984. And they felt like if that passed, then perhaps it would unlock a nickel or a dime per month per subscriber, and that would be an important revenue stream.

• 32:55Guy Raz?

  So this is important to explain, because obviously not everyone knows about this. But before 1984, cable was highly regulated in what the providers could charge to subscribers. We should also mention that this was a time when there were like hundreds of cable distributors and operators, right? It wasn't like today where you've got mass consolidation and just a few big regional players or national players. It was like... Hundreds, like, all over the country, right?

• 33:26Speaker 01

  Yes. So there's the big, at the time Comcast was not the biggest cable operator.

• 33:31Guy Raz?

  Right.

• 33:31Speaker 01

  It was a company called TCI, Telecommunications, Inc. And they had all of about four million subscribers, but it was clear they were gonna be up to six and maybe even 10 million subscribers. But this was a time, as you said, I mean, there were literally thousands of small cable systems sprinkled all across America.

• 33:51Guy Raz?

  Wow.

• 33:51Speaker 01

  And, you know, their capital investment was fairly low. They had to get some, invest in dishes. Each one pointed to a communications satellite that had 24 channels, you know, capture that, that, that image, put it into what they called their head-in center. And from there, they would boost the signal through and get it out to the subscribers.

• 34:14Guy Raz?

  And they would literally lay down cable in their region?

• 34:17Speaker 01

  Literally lay down cable, and they had to face a number of hurdles. As you can imagine, cities didn't want a second pole system, right? You know, because there were telephone poles.

• 34:28Guy Raz?

  Right.

• 34:29Speaker 01

  And so there was actually a pole attachment law where cable operators had the right to attach.

• 34:33Guy Raz?

  To attach to telephone poles.

• 34:35Speaker 01

  To get their signal.

• 34:36Guy Raz?

  This is, this is like the early railroads, where every tiny railroad, you know, parts of railroad systems were owned by different people because they would lay down the track.

• 34:45Speaker 01

  Right.

• 34:46Guy Raz?

  And some of these tracks weren't compatible, right? They had like different gauge sizes. I mean, that's what cable was like in the early 80s. You just had these small, little operators who paid to lay down the cable. It was their region. And, and, and they decided what was gonna go on their, on their channel. But so you, so you would basically, the, the challenge you had was you had to get onto channels. It's like, it's like having a product and trying to get into every convenience store in America, like having a iced tea and calling every convenience store in America to get on their shelves. I mean, that seems like an overwhelming challenge to overcome.

• 35:25Speaker 01

  Yeah. And then in our industry, I mean, you mentioned it, you know, developing of the business plan, which means the business model. And so in the early days of cable, it was quickly kind of determined there would be two business models. One was A model which HBO and later Showtime adopted, which was selling direct to consumer. Say for $8 a month, you could subscribe to HBO and the revenue from that subscriber would be split.

• 35:54Guy Raz?

  With the operator.

• 35:55Speaker 01

  Yeah, 50% of the cable operator, the distributor, and 50% to the national source, like a content provider like HBO.

• 36:03Guy Raz?

  Right.

• 36:04Speaker 01

  The other was the route that Ted Turner went, which was building a channel that would get widely distributed and you could charge advertising. And then what Ted Turner and others like ESPN, who many times had to launch without charging the cable operator any fee, they all clung to the hope that at some day, the cable operator could charge what the market would bear. They might increase their rates from $16 a month for cable service to $18, but they would add on two or three services.

• 36:39Guy Raz?

  Right.

• 36:40Speaker 01

  And that's where we saw an opportunity that at some point, we could get a nickel or a dime that the cable operator would pay. When you can multiply a dime times 4 million homes a month, all of a sudden, you have a decent revenue stream to help pay your...

• 36:56Guy Raz?

  To help keep the business going.

• 36:58Speaker 01

  Yep, exactly.

• 36:58Guy Raz?

  But the idea was you'd go to an operator and say, hey, look, you guys need content. We make great content. Here you go. And you would essentially offer it to them for free.

• 37:08Speaker 01

  Yeah, we'll be free for two years, but in the third year, you will agree to pay us a nickel if you have the freedom to do so through deregulation.

• 37:20Guy Raz?

  Got it, got it.

• 37:21Speaker 01

  So we were really rooting for deregulation.

• 37:25Guy Raz?

  Right. All right, so you had huge challenges to overcome in this business model and you, but you decide this is, I'm going to pursue this thing and I need to raise money. And so when you went down to, I guess you were connected with these, these folks from Store Communications in Fort Lauderdale, which was at the time, a fairly sizable cable operator. Presumably you went down to them looking to see if they might give you some seed money to start this up.

• 37:55Speaker 01

  Yeah.

• 37:55Guy Raz?

  And you, were you looking for $25 million at that point?

• 37:58Speaker 01

  No, at that point, it was just like, I was trying to see if they might be a prospect to be part of a consortium or a group. Of investors.

• 38:09Guy Raz?

  Right.

• 38:10Speaker 01

  Turned out they weren't a good prospect, but they were very helpful. They had a very bright marketing team that was the set in on the meeting and, you know, said, you've got to decide, what do you want to be? Do you want to be a premium service? Do you want to be a basic only service and just live on advertising? And you've got to pick a name that's better than cable educational network and say, I know, I know, I know.

• 38:29Guy Raz?

  Yeah.

• 38:29Speaker 01

  So it was kind of a key moment on the plane ride on the way home. I remember just writing down names and, you know, by the end of that trip, I had Monday morning, that was on a Friday and on Monday morning, I had picked the, the name Discovery. I had kind of started thinking about Discovery, but there was a number of prospects. I mean, I love the word explore, curiosity, wonder.

• 38:54Guy Raz?

  Yeah.

• 38:54Speaker 01

  Vista, something bright and uplifting. I knew I didn't want to go with something that the consumer didn't immediately understand. I felt like Nickelodeon, for example. It doesn't really, in a vacuum, when it was first introduced, what is Nickelodeon? Now, later, we all now know it's a children's channel. But I wanted to be fairly simple, like cable news network. You knew exactly what that was when Ted started it. So, you know, the Discovery Channel, I felt people would understand what that is.

• 39:25Guy Raz?

  All right. But what I'm trying to understand here, John, and this is a sort of early 1983 now, and, and this is, this idea is now, it'd been in your head for about nine months. You still haven't raised a dime at this point.

• 39:38Speaker 01

  No, no.

• 39:39Guy Raz?

  You're, and you're pitching, right? You're pitching people and, and.

• 39:42Speaker 01

  Pitching people and the other, other, you know, the, the building blocks of this, we kind of covered several of them. But this other question about advertising, I kind of looked on PBS, who's sponsoring Cosmos? You know, and I remember making a call early on to General Motors and they were kind enough to say, well, that's handled, you know, by our agency. And so I got in touch with the agency, that agency for General Motors. And so they said, this is an intriguing idea. But they said, John, for us to advertise in earnest, you know, you need distribution in at least 15 million households. And, you know, ask why? They said, well, that's the minimum number of households that Nielsen

• 40:26Speaker 01

  needs to actually issue a ratings report. So that was an initial threshold. So how long would I have to spend money at a million dollars a month? You know, before we could reach 15 million homes? Because that would have been the first time we could actually have meaningful advertising revenue.

• 40:48Guy Raz?

  Okay, so clearly, and not to be blunt about it, I guess I shouldn't be blunt. At this point, you don't have a whole lot to work with, right? I mean, you don't have any advertisers, you don't have any investors, you don't have a distributor. What about the content piece? Were you at least like starting to reach out to like producers and content providers to get some of their programming?

• 41:13Speaker 01

  Yes. By that time, I had, you know, a kind of a preliminary contract in the development of the BBC. So I knew what a large body of 500 hours of content would cost.

• 41:25Guy Raz?

  What would it cost?

• 41:26Speaker 01

  Oh, actually fairly affordable. So a documentary that the BBC would have spent $100,000 to $250,000 on, I could really license for only $1,000 an hour.

• 41:39Guy Raz?

  Wow.

• 41:40Speaker 01

  And so, and again, for them, it's just found money.

• 41:43Guy Raz?

  Because at that time, they weren't being repurposed. There was no other distribution.

• 41:47Speaker 01

  There was no market for it. So here's this guy from America who's offering $500,000, you know, to pay for each year. We pay that amount each year to license it. And so for them, well, that's another two or three great documentaries we could do.

• 42:03Guy Raz?

  But in some ways, that year, right? Because you're financing this through presumably your consulting work. And really, there wasn't much to finance. But you're kind of building, and I hope this doesn't sound disrespectful, John, because I'm absolutely just blown away by.

• 42:22Guy Raz?

  Your audacity, you were kind of building a house of cards here because on the one hand, you were going to the BBC and saying, hey, you know, I'll let's work on a $500,000 contract. You're going to Westinghouse or whoever the satellite company was and says, and you're saying, yeah, let's, let's talk about this deal. Meantime, you didn't have any money to do these deals. So were you telling these potential partners, listen, I got to raise the money, but this is sort of the deal I'm thinking of?

• 42:50Speaker 01

  Yeah, you have to do everything. I mean, everything has to be transparent. So it's contingent. You know, so when you talk to the BBC is like, you know, this is, this is my plan and it's contingent upon financing. And, you know, part of that financing is going to be contingent upon if I can get letters of intent to carry the service

• 43:07Guy Raz?

  Right.

• 43:08Speaker 01

  from distributors.

• 43:09Guy Raz?

  And did you get those letters?

• 43:10Speaker 01

  Yes. And so, you know, all of this is building throughout, you know, 83. And then by December of 84, it was clear. I'd talked to enough investment bankers. I was getting close, closer to one investment banker. And here were the conditions that they would invest. I said, John, if you can furnish this evidence that you can get distribution, if you furnish this evidence through a contingent contract that you can get content, and we can see that advertisers would be interested, then we'll invest.

• 43:43Guy Raz?

  And, and by the way, these are investment banks in New York, right, that you're going to?

• 43:47Speaker 01

  Yes.

• 43:47Guy Raz?

  And, because this is really before the time of venture capital, which really kind of exploded in the last 20 years. This is early 80s. How did you even get, get meetings? You were, you were not a media mogul. Like, how did you even get into the door? Because I think you went and met with like Merrill Lynch and

• 44:06Speaker 01

  Yeah, there was a number of like Oppenheimer, you know, for example.

• 44:10Guy Raz?

  Yeah. How did you even get into the door?

• 44:12Speaker 01

  It's an overused word, but it's called networking. But it's as simple as asking friends, right, and contacts, people who might know. And every entrepreneur, you have to have a tolerance for hearing no.

• 44:23Guy Raz?

  How do you have that? How did you have, because you were 30, 30, 31, you had a kid at this point?

• 44:28Speaker 01

  You have to be, you have to be so confident that you know more than the person who's telling you no.

• 44:36Guy Raz?

  Right.

• 44:37Speaker 01

  And so you have confidence in your research. You have confidence in all that background of conversations you've had with cable operators.

• 44:44Guy Raz?

  Yeah.

• 44:44Speaker 01

  With content providers. And you just have to say, I am working on these, you know, conditions. And I know, but there's that ultimate confidence that I had that if I can just put this on satellite, people are going to respond favorably.

• 44:57Guy Raz?

  Right. And you had real evidence. I mean, you had like ratings from television networks that showed when they aired documentaries, or when PBS aired documentaries on science, the ratings went up.

• 45:10Speaker 01

  Yeah. But you have setbacks. You do have setbacks. You have, there are several moments like that. And, you know, one of my heroes was Walter Cronkite. And when he stepped down from the anchors chair for CBS Evening News, it was kind of on a promise that CBS would invest in a series for him called Universe, that he would air every Tuesday night. And lo and behold, right in the middle of my fundraising for Discovery Channel, CBS canceled Walter Cronkite's Universe.

• 45:42Guy Raz?

  They canceled this, basically signaling that, no, this, actually, there is no market for this.

• 45:48Speaker 01

  Exactly. And one person pointed out, well, what makes this fellow Hendrix think that he can make documentaries work on television when CBS just canceled Walter Cronkite's Universe series?

• 46:02Guy Raz?

  Yeah.

• 46:03Speaker 01

  And that is, that's a great question. And so I kind of knew the answer. And I got in touch with Walter Cronkite.

• 46:11Guy Raz?

  Yeah. This is, you actually reached out to Walter Cronkite and said, hey, can I meet with you?

• 46:16Speaker 01

  Yes, yeah.

• 46:17Guy Raz?

  I mean, he was one of the most famous people in America at that point.

• 46:20Speaker 01

  Exactly. So, you know, I guess my telephone skills were a little bit good. By this time, I called, and the person who answered that phone, I'll never forget her, never forget her name, Blanche Lafitte. I just love that name. Well, she was his personal assistant.

• 46:38Guy Raz?

  Wow.

• 46:38Speaker 01

  And I said, I would love to have an opportunity to talk to Mr. Cronkite about a cable channel devoted to documentaries. I think he might have an interest in it. And she said, well, write me a letter. No more than one page. And so I did. And then, lo and behold, it was like, maybe the end of the following week, the phone rang in my house, early one morning, it's about 8:30, and there was that voice at the end of, at the other end of the line.

• 47:11Guy Raz?

  Walter Cronkite.

• 47:12Speaker 01

  It was, it was funny, because he called me Mr. Hendricks. He says, Mr. Hendricks, I've just read your letter and I'm very intrigued. And it was like, unbelievable to me. And at first, I thought, wait a minute, there's some people who know that I'm trying to reach Walter Cronkite.

• 47:26Guy Raz?

  You thought they were pulling your chain there?

• 47:28Speaker 01

  Yeah.

• 47:28Guy Raz?

  Yeah.

• 47:28Speaker 01

  Yeah, but it was clear it was him. And he couldn't have been nicer. And he said, you want to come up here? And I'll tell you the whole story about what I've done in nonfiction television. I was on a train, I think, within the week, and found myself

• 47:44Guy Raz?

  Wow.

• 47:44Speaker 01

  meeting with Walter Cronkite.

• 47:46Guy Raz?

  And, and you got him, and this is something that's really amazing, I read, which is, every time you met with people, whether it was like potential advertisers or Walter Cronkite, you got him to write you a letter, basically endorsing your idea, not even committing to it, or anything, just saying, hey, I'm Walter Cronkite, this is a great idea.

• 48:04Speaker 01

  Yes.

• 48:05Guy Raz?

  And you would show those letters to investors?

• 48:08Speaker 01

  Yep.

• 48:09Guy Raz?

  All right, so 1984, you are really trying to raise money. And I read at a certain point, you were, I mean, you were offering as much as like 40% of the business for $5 million.

• 48:22Speaker 01

  Yeah.

• 48:22Guy Raz?

  You could raise $5 million.

• 48:24Speaker 01

  Yeah, it was clear, I wasn't, and I knew it was going to have to be more equity sold than that, because after consulting with Allen and Company, and they were really bright, and we had kind of investors lined up where we could see maybe $2 million, which is like, two months.

• 48:42Guy Raz?

  And, and by the way, Allen and Company, just to clarify, is, is an investment bank that you were working with to get funding, right?

• 48:48Speaker 01

  Yes. And so we thought, you know, the first stage would be, we could maybe, within the first year, you know, the first six months, raise $5 million, but show some success, and then raise maybe another $5 or $6 million. But it was clear, the fundraising couldn't be in, in one fell swoop of $25 million. That was just unrealistic. But everybody felt, you know, this is a gamble. And the earliest gamble was the riskiest gamble. We closed on our very first round of financing was $2 million. That was extremely, extremely risky.

• 49:23Guy Raz?

  All right. So 1984, there's this trade show in Anaheim, California. And you've got a booth there for Discovery Channel. But you didn't have any content yet that you could show people. But I guess you, at this show, you had worked on like a sizzle reel?

• 49:44Speaker 01

  Yes. And so when cable operators would come to our booth, we would show them that. And they said, this looks interesting. And they would give me a verbal. But I knew I needed something more than a verbal. But Westinghouse, anxious to lease a transponder for

• 50:01Guy Raz?

  The satellite.

• 50:02Speaker 01

  Yeah, the satellite transponder. Said, John, you know, we'll donate. We will give you the use of the satellite for a week.

• 50:12Guy Raz?

  For free?

• 50:13Speaker 01

  For free.

• 50:14Guy Raz?

  In exchange for what?

• 50:16Speaker 01

  In exchange, if you can get to raise the money, we want to be your satellite provider.

• 50:22Guy Raz?

  Wow. They said to you, give us content and we'll give you a week's free. We'll beam your content.

• 50:27Speaker 01

  Yeah, so we put up a sneak preview. What I call sneak preview week.

• 50:31Guy Raz?

  Basically, you've, you got content and you bundled it up into a week's worth of programming. And this Westinghouse satellite beamed it out. But, but, but basically all that did was enable cable companies to see the feed. They were not broadcasting it. They just had the ability to see what this satellite was sending out. So in other words, you could have, in theory, made, I don't know, a thousand video cassettes and sent them each a video cassette.

• 51:03Speaker 01

  Yeah. This is a very efficient way to distribute.

• 51:06Guy Raz?

  This is an efficient way for people to see it. Right, okay.

• 51:08Speaker 01

  That's right.

• 51:09Guy Raz?

  And what was on it, by the way? What were you showing?

• 51:11Speaker 01

  It was science and technology. There was some sample content that by that time, the BBC had cleared some rights to allow us to uplink some content. Again, Knowing that if it was successful, then you know, I would have the $500,000 for the, for the first payment to BBC. And so they, everybody was incented to making this a success by this time.

• 51:36Guy Raz?

  Yeah. All right. Here's what I'm trying to figure out. The timeframe is crazy to me because I think by the spring of 85, you managed, this is now a year and a half in of just pounding the pavement, trying to raise money. You get the commitments that you need. And so the investors come in and, and they make an investment led by Alan and company. And you raised like $5 million.

• 52:02Speaker 01

  Yep. But, you know, you gotta dig down, you know, how much money can you possibly put into the venture? And I didn't have a lot. And so, you know, we were in, in risk of, you know, our American Express card being canceled. We used American Express, my American Express card to pay so many expenses.

• 52:22Guy Raz?

  Yeah.

• 52:22Speaker 01

  And, um, you know, I had just some people who were working for me. And there was a guy who had recently retired from ComStat General and he surprised me one day with a $50,000 check, which was all the money in the world.

• 52:35Guy Raz?

  Yeah, I bet. But what I'm trying to, I'm trying to understand, John, is the devil, with television, the devil is in the details. It's like, you know, for example, uh, you know, the shows had to be 52 minutes or 55 minutes and the edits were, had to be exactly right to hit the posts and all those things. How were you able to source the people who knew how to do that stuff?

• 52:58Speaker 01

  Yeah. So you pointed out a, a difficult phase for every entrepreneur. And that is that phase between the time you have the idea, you've got the plan, you've got the elements together, and you can see that this will lead to months later, a successful fundraising effort. For us, it was the 5 million. Where do you operate? What funds? Because I needed staff. You know, I needed staff.

• 53:26Guy Raz?

  People who knew how to run a television network.

• 53:29Speaker 01

  Exactly. And so, you know, I recruited a guy who was head of the radio, television and film department at the University of Maryland.

• 53:38Guy Raz?

  Wow.

• 53:38Speaker 01

  You know, he knew all about how to do a television station. And I was just so fortunate in that I had access to a major university a few miles away.

• 53:49Speaker 01

  For them, this was a goldmine of internship opportunities.

• 53:51Guy Raz?

  Right.

• 53:52Speaker 01

  For some of their students to come over and edit films and to meet that clock. As you said, you have to create your model clock. And so, things had to be edited down very crisply so that they could be loaded into the, at the master control facility. And then the clock would start and each item would play in sequence.

• 54:13Guy Raz?

  All right, so it's June 17th, 1985, which, which is the day you actually launch, where, where the Discovery Channel is going out. It's going to be sent out to the public.

• 54:25Speaker 01

  Yes.

• 54:25Guy Raz?

  And I think, I think on that day, you had like, close to 20 employees. You had roughly, I think, $5 million of runway. And by the way, on that first day, how many people in America could actually see the programming?

• 54:41Speaker 01

  Yeah, so on that day, we didn't know exactly. Later, we learned about 156,000 households.

• 54:48Guy Raz?

  Had access to it.

• 54:49Speaker 01

  Were able to see the service, yeah, had access on that very first day.

• 54:52Guy Raz?

  How would they know about it? I mean, did, did you get a lot of media attention? Was, was there, how would, just a random person?

• 54:58Speaker 01

  Not much media attention. So, the cable operators would promote what they were going to add. So, a number of cable operators started in their, what we call bill stuffers. And so, at that time, people, you know, people would get their cable bill monthly.

• 55:11Guy Raz?

  Oh, in the mail, yeah.

• 55:12Speaker 01

  In the mail. And in that, there would be some promotion. Here's a new movie that's coming up next month on HBO. And by the way, we're launching headline news from CNN. We're launching, you know, the Discovery Channel. And then you learn, if they stayed for at least six minutes, then it would count as a viewer.

• 55:35Guy Raz?

  Wow. It is amazing that people found out about things through, through things in, through the mail, through bills that they received. Like, I, I can't even remember the last time I, I opened my mailbox today, right? Yeah, I don't even, I don't even know if I have a mailbox, actually. I don't think I do. But, but from what I, I understand, you, you start to hear from viewers pretty quickly, right? They, they started to like, write in and write to the cable operators and say, hey, this is great stuff.

• 56:01Speaker 01

  It was quite comical. So we launched, I think, like at noon, something like that on June 17th. And within just, I mean, 10 or 15 minutes, the phone was ringing. We were in a conference room and the main kind of reception area was just outside. It was so small, we had like 19 people. The phone kept ringing and ringing and ringing. And the, our staff person who was supposed to answer the phone was in watching Discovery Channel with us. We said, go get the phone. And then she came back and she said, it's a teacher in Kansas and she wants to know if she can record this and use it in the classroom. It was a show that was on called Iceberg Alley. And we all looked at each other as like, I don't think we have the education rights to use for public exhibition

• 56:46Speaker 01

  in a classroom. Tell her we don't have the rights, but we're working on it.

• 56:50Guy Raz?

  Yeah. And to be clear, you were not a production business. You were not in the business of producing original content. You were licensing?

• 56:57Speaker 01

  We were licensing content only. You know, my dream was, you know, once we got to break even, and then we could then start investing our own content. So that if we made, had positive cash flow of $5 million, we could reinvest that in content.

• 57:13Guy Raz?

  But at this point, I know you had five or six months of runway, right? When you launched in June. That means, with $5 million, that means...

• 57:21Speaker 01

  It's going to be gone.

• 57:22Guy Raz?

  Yeah, by November, your money is going to run out. So I have to imagine you are, you were hustling. And from what I understand, you get connected with a firm or company called The Chronicle Publishing Company. And they're led at the time by a guy named, I think, Leo Hindery. And they say, hey, yeah, we're going to come in and make an investment. What was the investment that they agreed to, to give you?

• 57:47Speaker 01

  Yeah, it was, it was the entire next round. We thought that we could perhaps raise $6 million.

• 57:55Guy Raz?

  Wow.

• 57:56Speaker 01

  We knew that would get us to mid next year and then maybe by that time, you know, we would be in, you know, let's say 10 million households.

• 58:05Guy Raz?

  Right.

• 58:05Speaker 01

  And have some advertising revenue.

• 58:08Guy Raz?

  And Chronicle was going to cover the whole round. They

• 58:10Speaker 01

  Yes.

• 58:11Guy Raz?

  pledged $6 million. They were going to give you $6 million. And it was more or less in your mind, a done deal. Like you were not worried about covering. Cause you, I think you had like, you owed millions of dollars to vendors, right? To the BBC and to the satellite people.

• 58:28Speaker 01

  Yeah. By this time, we were asking the BBC to be patient for the next payment for us. We, Alan and company and I, in late 1985, had a heart to heart meeting with Westinghouse and said, you know what? We're not going to pay our satellite bill for the next three months. That's about a million dollars and we'll offer you stock in Discovery Channel in lieu of that. I mean, they were very resistant, but in the end, to be supportive, they

• 58:59Guy Raz?

  They took it.

• 59:00Speaker 01

  grudgingly took stock.

• 59:01Guy Raz?

  Right.

• 59:02Speaker 01

  Now that $1 million, I think turned in later to be like 65 million.

• 59:07Guy Raz?

  Nice.

• 59:08Speaker 01

  You know, so it ended up being a good investment, but it was very, very difficult. I can't explain. And then, you know, when you hear an investment banker and the client themselves saying, we're in.

• 59:19Guy Raz?

  Then you're, yeah.

• 59:20Speaker 01

  It is, it's not done. It's, you know, you've never, nothing's done until people say the check clears the mail and you get to closing date. But we, but they set up a closing date and

• 59:31Guy Raz?

  This is going to, supposed to be in what? January, end of January 86?

• 59:34Speaker 01

  End of January, yeah, of 86. And we had really counted on that. And it was absolutely devastating when Leo let his bankers know the board did not, in the end, approve the investment.

• 59:49Guy Raz?

  So wait a minute. You get a call one day from who telling you, oh, you know, that's that $6 million? You're not going to get it?

• 59:57Speaker 01

  Yes. It's closing day. I mean,

• 59:59Guy Raz?

  Closing day. On the day you're supposed to close, you get a call saying, actually, this is not closing.

• 1:00:04Speaker 01

  This is, it was on a Tuesday. I was down at our lawyer's office. Dick Crooks from Allen and Company had taken the train down the night before. So he was there. We were there for closing. This is when money was going to be wired to the account. And then we heard, I think it was around 11:00 or 11:30, Allen and Company got a call from E.F. Hutton, and they were mortified.

• 1:00:28Guy Raz?

  And E.F. Hutton was representing Chronicle. So basically, your bankers and lawyers got a call from their bankers and lawyers?

• 1:00:36Speaker 01

  Yes. Yeah. They just said, we can't believe this has happened, but the board at the Chronicle has turned down this investment.

• 1:00:44Guy Raz?

  Wow.

• 1:00:44Speaker 01

  We thought we had an approval there. It was absolutely devastating.

• 1:00:49Guy Raz?

  So you presumably, at this point, have to face your staff because you are not, imagine, you're not sure whether you guys are going to survive, or maybe you're sure that you're not going to survive.

• 1:01:03Speaker 01

  Yeah, as my wife calls it, Black Tuesday. And it was. It was, I think, of all the days at Discovery, it was the darkest.

• 1:01:11Guy Raz?

  When we come back in just a moment, how John finally gets the money he needs, and how with a little help from Soviet television, he starts to turn Discovery around. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

• 1:02:14Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's 1985, just months after John has launched Discovery Channel. He's run out of money and the only prospective investment he had has just fallen through. And so the only option at that point, work the phones.

• 1:02:35Speaker 01

  And it's like, you know, calling the BBC, you know, that check we were going to get out to you tomorrow, we're not going to get it out to you. You know, then the investment banker was like, you know, we don't know what we're going to do, but we will think, try to think of something. And so what they thought of, the banker that I was most closely working with at Allen and Company, one of his colleagues was a guy named Paul Gould. And Paul Gould was very close to John Malone.

• 1:03:02Guy Raz?

  And we should, we should make it clear, John Malone is like a legendary figure in cable, Liberty Media, and the head of TCI at the time, the cable operator.

• 1:03:11Speaker 01

  Yeah, I mean, John Malone is, you know, he's a strategic pioneer in the cable industry on the distribution side, and then later really on the content side. He had seen promotions about Discovery Channel. And that kind of was the phone call that saved the day.

• 1:03:28Guy Raz?

  All right, so in the kind of 11th hour, right, there's like a Hail Mary thrown to John Malone. Because from what I understand, you had investors basically saying, you got to get ready to go into bankruptcy.

• 1:03:42Speaker 01

  Yeah.

• 1:03:42Guy Raz?

  But, but you were, you were not prepared to do that. You still thought, we got to find a lifeline.

• 1:03:49Speaker 01

  There's got to be a way.

• 1:03:50Guy Raz?

  There's got to be a way.

• 1:03:51Speaker 01

  There's got to be a way. But it was the first Hail Mary. You know, typically, there might be four or five Hail Marys thrown. It was actually the first one and it connected. And, you know, John was immediately supportive. John said, we can't let anything happen to Discovery. And this was probably on Thursday. So there was Black Tuesday, and I think by Thursday, I was in a meeting in a hotel. I mean, this was a bizarre era. They actually wired $500,000 to our accounts at Discovery.

• 1:04:23Guy Raz?

  Wow.

• 1:04:24Speaker 01

  And that was a godsend. And so, and then it was like, okay, let's, how do we raise the next round of financing? And it was clear with, with TCI's leadership that maybe we could get $20 million and actually complete the financing for Discovery.

• 1:04:44Guy Raz?

  What's so confounding to me, right, is that you were literally days away from having to shut this thing down. You had creditors kind of asking for, you know, you couldn't pay your people. And then John Malone comes in and gives you half a million dollars. Presumably, he did not know that you were in financial straits. So this was not, this was not known to anybody.

• 1:05:11Speaker 01

  No, it wasn't. And John didn't want to be do all of it, you know, because the first question, how much money do you need? And it was still, well, a total of 25 million. We've raised five, but we need 20. And John didn't see TCI doing all 20. He just said, you know, it would be stronger if we created a group, a partnership, a group of investors from the cable industry that maybe each put in 5 million. And so we began to think about, you know, four large multi-system cable operators that would come in Comcast, Continental, Cox, Newhouse Family, and of course, TCI. And then John was very close to a friend

• 1:05:53Speaker 01

  of his in Denver, Gene Schneider, who ran United Cable, which ultimately merged with United Artists to become United Artists Cable.

• 1:06:01Guy Raz?

  And you did raise, you did raise money by that. I mean, it's amazing because like in February of 86, you were out for the count. By the summer of 86, you had raised $20 million. How, by the way, I have to imagine that you had to give up a substantial amount of your own ownership of the company you started.

• 1:06:21Speaker 01

  Yeah, and I gladly did it. I mean, for me, and what I've learned is if you think too much about your equity piece, or you know, how much money you're going to make, I just don't know that many successful entrepreneurs who are so money focused. I think if you focus on your mission, then all of that's secondary. And yeah, so for me, it's, it was that moment in time when I incorporated, when I had a hundred percent equity, and then you get diluted down and diluted down. I think after that, I think it was around, maybe around seven percent. And then, you know, for the longest period, I was at four percent after, you know, I sold some shares.

• 1:07:01Guy Raz?

  You, all right, so now you've got the, the money to keep you afloat, but you were still, I mean, right, you still have to become profitable. So where was your revenue coming from in 1986? Did you start to get some of that, some of the money from the cable operators? That, that, that five cents or 10 cents per subscriber?

• 1:07:21Speaker 01

  Yes. I was lucky. And then the Cable Act of 1984 actually passed. And it allowed the cable operators to actually increase their rates, depending on just what the market would bear. And so we would offer our service free, you know, until January of 87, at which point we would pay, cable operators would pay a nickel. And then that would grow over the contract period to 10 cents per subscriber per month.

• 1:07:53Guy Raz?

  So with that five or 10 cents per subscriber, that was enough to just keep the, the business going. It wasn't enough to make it profitable yet, but just you had, you had to also advertising revenue.

• 1:08:05Speaker 01

  Yeah. So you, you'll remember, we've talked about the burn rate or the monthly expenses being a million a month. So if you, if you have distributors representing 10 million households and they're paying you a nickel, then that's 500,000 a month. If they're paying you a dime, then that's a million dollars a month. So we knew just by our contracts, break even was going to occur sometime in 1987. In other words, there would be that magic month and it actually did occur. I think it was August of 1987 when our monthly revenue exceeded our monthly expenses. And that's a great period for any entrepreneur. Then you know you have the business model in place.

• 1:08:46Speaker 01

  And then when you look at growth and distribution, we saw when we crossed 15 million, we had all these advertisers that would be glad to advertise on Discovery Channel and make it part of our cable buy.

• 1:08:58Guy Raz?

  And you, I mean, the programming that you were airing, I mean, it was like, you know, you would have documentaries, right, that you would air. And then you would, I think, one, like, at one point, you just played, you just broadcast hours of television from the Soviet Union. That was like, was it translated in real time?

• 1:09:21Speaker 01

  Yeah, it's always somebody, you know, I didn't have the idea. A fellow in New York had started tracking Soviet television signals with a satellite dish. And so Columbia University, the Russian Studies Department was using it in the classroom. And he said, would you like to put this on the Discovery Channel? And it was the oddest type, but, you know, you're trying to get publicity in every way you can, I thought, and attention. And it was immediately intriguing because I asked for what's on Russian television.

• 1:09:53Guy Raz?

  Yeah.

• 1:09:54Speaker 01

  And he said, it's just every kind of, we had game shows, they have morning children's show. And then, you know, when I saw some tapes of it, I said, this would be fascinating, but we, you know, we would have to interpret it. But as with anything, with any idea, there's a lot of hurdles. And this one was the, our State Department said it wasn't legal, that we couldn't, you know, intercept a foreign satellite and take that signal and display it into American television households, that that was illegal. It had to go legally through the Intelsat. Television satellites parked over the Atlantic Ocean, for example. So we had to work that out and actually get a legal signal through the Intelsat system.

• 1:10:36Speaker 01

  But that's what we did. We put on a week's worth of Soviet television every night.

• 1:10:41Guy Raz?

  It's amazing. I mean, you've got a lot of publicity. Johnny Carson, who was the most famous person in the US was like talked about on a show. Yeah.

• 1:10:48Speaker 01

  Oh, my goodness. To have Johnny Carson talk about Russian programming on the Discovery Channel and make jokes about it, you know, and it was terrific. He did that, I think, three nights running. And what great publicity that was.

• 1:11:02Guy Raz?

  All right. So you start to really find your audience and you are reaching, I think, already 30, potentially 30 million households by June of 88. That doesn't mean 30 million people are watching you. But, but really, I think the turning point, if I'm not mistaken, was sharks. When you started to talk about or air things about sharks. Is that, is that fair to say?

• 1:11:28Speaker 01

  Yeah. It was in 80s. That timeframe, we were just doing some novel things. They're live from Russia, certainly. And so we had a, I remember we had a meeting at the Hey Adams Hotel, which was kind of fancy for us. And we had, you know, the whole executive staff and some of the programming staff. So it wasn't a big group. I would think there's probably around 20 in the room. And we were just, you know, we told everyone, bring your ideas. And so we were just going around the room. It was the classic, what if me? What if we did this? And this young programmer, Steve Cheskin, and he said, what if? He said, you know how independent TV stations have like Marilyn Monroe Week or John Wayne Week

• 1:12:12Speaker 01

  where the movie's five o'clock every day? And he says, so they have theme weeks. He said, and he just blurted out, I said, what if we had Shark Week? And it was, the idea was as simple as that, but as profound as that, you know? And we kind of all said, yeah. You know, they all kind of looked at me and I said, I think it's a great idea. And, you know, before that meeting ended, we said, that's one idea we want to implement. And so that was the origin of Shark Week. And I think it is the longest running television series event in, in television history right now. It's the longest one that's been maintained.

• 1:12:54Guy Raz?

  The story of Discovery in the 90s and the 2000s is well-known. It's now a huge, enormous player in the media world. You are no longer affiliated with Discovery today, right? You obviously ran it and continued to run it into the 2000s and were the chairman for some time. But just to be clear, you're not associated with it at all today, right?

• 1:13:19Speaker 01

  Yeah.

• 1:13:20Guy Raz?

  Discovery entered a phase of stability in 1988 and then just a consistent growth and acquiring other networks, The Learning Channel, and starting Animal Planet. But here's what I want to ask you, a broader question about the evolution of Discovery. Because it really was, when you started it and when you ran it, it was like a slightly commercial version of PBS. It was great content that was also good for you, right? And it proved the model that you could do both things. Like, I don't know, like a milkshake made with agave instead of cane syrup.

• 1:13:59Guy Raz?

  It was delicious and a little bit healthier than what was being offered on mainstream network TV, but a little bit more fun than, let's say, PBS. But over time, Discovery did and does today, aired a lot more reality-type TV stuff. Stuff that really was cheap to produce but got a lot of audience ratings. And I wonder if, over time, you think that it strayed from the vision you had initially.

• 1:14:31Speaker 01

  Yeah, and I think it's clear to viewers, the evolution. It was forced partially by just the raw economics of people's viewing taste in the majority. At some point, management starts looking at the revenue model, and it just became irresistible as people initially saw that, well, gee, if we put on at History Channel, Pawn Stars... It gets a little more rating than the history of the, you know, a history series, for example. And I remember the bittersweet moment, you know, when the ratings came in on Honey Boo Boo. But in the back of my mind, it was like, you know, that's, that's not the kind of content

• 1:15:16Speaker 01

  that I get enthusiastic about and it's certainly not the kind of content that drove me to start Discovery. And so, you know, for us, I think the pinnacle of Discovery, at least in Mission, being true to Mission, was when we co-produced Planet Earth.

• 1:15:30Guy Raz?

  Yeah.

• 1:15:31Speaker 01

  Which we started, yeah, which was wonderful. I mean, we started that project in 2002 and had it finished for airing in 2007. And for me, that's, that's the essence of Discovery.

• 1:15:42Guy Raz?

  I don't know. I mean, I wonder whether you can really blame programmers at Discovery, right? I mean, if it's, it's a company that has to be sustainable, that has to make money, and PBS doesn't, right? PBS, NPR, they're, they don't have to worry about shareholders or revenue because they're nonprofits and they're bringing in money from, but they still need to be sustainable to pay their employees, but not quite in the same way as Discovery. So it's kind of hard to blame Discovery's programmers for going where the audience wants. Or, or, or can you? Can we?

• 1:16:16Speaker 01

  No, you know, for me, I mean, I was on the board, you know, for all those years and I supported, because you're right, I mean, you have to have a sustainable organization. And when you have over, a little over half of your revenue is from advertising, it drives you to, to certain decisions. And so, you know, for me, my mind just started to wonder of like, well, is there another model for this type of content?

• 1:16:39Guy Raz?

  You decided in 2015 to, I guess, kind of go back to your original roots. You launched a venture called Curiosity Stream, which is essentially a version of, of your, I think, your original version of, vision of Discovery, which is great educational content, but that would be available on demand through smartphones and then other, you know, other, other, other formats.

• 1:17:06Speaker 01

  Yeah, it's it's back to kind of the original mission, which is I try to stay away from the word educational because that, you know, kind of brings up eat your spinach kind of TV. So, you know, what is is there a nonfiction content that's entertaining and enlightening? What was becoming clear to me is that something magic was happening in 2007 with the launch of Netflix. What Netflix did was the same concept that HBO did.

• 1:17:32Guy Raz?

  Yeah.

• 1:17:33Speaker 01

  Take great movies rather than create a linear channel feed, which is what HBO did. Netflix says, no, you can watch all movies, but you can watch what you want to watch when you have the time to watch it. So it's that ultimate control. And when you turn on the TV at night at eight 14 of being able to pull up something that you want to watch for the next hour or two. And so I felt we could do I could do the same thing that Netflix did that for movies in the world of nonfiction content.

• 1:18:03Guy Raz?

  Yeah.

• 1:18:03Speaker 01

  And so you can probably guess my first call, it was to the BBC. So when we launched Curiosity Stream with, you know, well over 100 titles of great content from the BBC and other providers.

• 1:18:16Guy Raz?

  And you are it is a publicly traded company, went public in 2020, I think.

• 1:18:21Speaker 01

  Yep.

• 1:18:22Guy Raz?

  It's a different story, right? Obviously, Curiosity Stream, because it's the risk is different. And you, by that point, I mean, to be frank, you were, you know, wealthy beyond your needs and beyond generations. So your sort of personal risk was somewhat lower, but still, I imagine that it's a challenging business, right? I mean, you've got to, at the end of the day, you got to get people to subscribe.

• 1:18:47Speaker 01

  Yeah, it's risky. I mean, you know, again, you have to have the finance financing in place. You have to have the delivery infrastructure. So in the case of streaming, you don't need, you know, international satellite infrastructure of 30 satellites, transponders to get your signal across the globe. It's a little bit easier, but it's still complicated.

• 1:19:07Guy Raz?

  Yeah.

• 1:19:08Speaker 01

  We're, again, we're very, very encouraged that, you know, we now are collecting payment, you know, from 20 million households. And that's around the world. So we have been global from the start.

• 1:19:20Guy Raz?

  I wonder, I mean, we were 31, 30, 30 years old. You had this really bold idea and a vision. And it was just at the this nascent industry is at the beginnings of Will become such a powerful and important industry, the cable industry, which has gone through major, is going through major disruptions today with streaming and cord cutting. When you think about all of the things that happened, all the things that had to go right for this to work, all those moments where, all the puzzle pieces, because this is a very complex business, how much of your success do you attribute to how hard you worked and how smart you guys were and how much do you attribute to luck?

• 1:20:02Speaker 01

  Well, I think a lot of people have read Malcolm Gladwell's book where he talks about the 10,000 hours.

• 1:20:08Guy Raz?

  Yeah.

• 1:20:09Speaker 01

  And I really believe that. I look at anybody I've ever talked to, whether it's Ted Turner, Elon Musk, or anybody, they've put in so much labor and effort. And it really is 10,000 hours or more if you just count it up. And one time when his book came out, I said, yeah, I did that and more. But you've got to count on 10% luck, things just lining up. We talked about one of them today, at the darkest hour, just the luck of just calling the right person. And that right person responding favorably, I'm talking to John Malone. Without John Malone, without those four cable operators stepping up when they did, I don't know if there would be a Discovery Channel today. I would have worked hard to find other routes.

• 1:20:54Speaker 01

  I think I might have found them, might have been more difficult. But again, I think it was just a good fortune of knowing the right people at the right time.

• 1:21:05Guy Raz?

  That's John Hendricks, founder of Discovery. And by the way, despite the notoriety of Shark Week, those programs don't even rank among the five highest rated in Discovery's history. The network has had the most success with shows like Moonshiners, about illegal moonshine producers, and Amish Mafia, a documentary about Amish vigilantes in Lancaster, Pennsylvania. But the highest rated show of all time on Discovery? The Deadliest Catch, the show about life aboard fishing boats in the Bering Sea during Alaska's king crab season.

• 1:21:44Guy Raz?

  Hey, thanks so much for listening to the show this week. Please do follow us on your podcast app so you always have the latest episode downloaded. If you want to contact us, our email address is [email protected]. If you want to follow us on Twitter, our account is at How I Built This, and mine is at Guy Raz. Our Instagram account is at How I Built This NPR, and mine is at Guy.Raz. This episode was produced by J.C. Howard, with music composed by Ramtin Arablouei. It was edited by Niba Grant, with research help from Claire Murashima. Our production staff includes Casey Herman, Julia Carney, Elaine Coats, Farah Safari, Liz Metzger, Harrison V.J. Choi, and Catherine Seifer.

• 1:22:28Guy Raz?

  Our intern is Margaret Serino. Jeff Rogers is our executive producer. I'm Guy Raz, and you've been listening to How I Built This. This is NPR.