The first time you see Brian Roberts you think of the young, lanky Jimmy Stewart with the boy-next-door demeanor. As chief executive officer of Comcast Corp., the nation’s largest cable operator with a mind-boggling 21 million subscribers, he’s the successful nice boy you can bring home to your parents.
And then there is that shrewd, in-your-face side of his persona, molded while growing up in the company of legendary media titans. John Malone can tell you about that. So can Barry Diller.
First, Malone’s lament. This tale’s from back in 1997, when Malone was still king of cable. Bob Magness, the founder of Tele-Communications Inc., then the nation’s biggest cable operator, had died, and Malone, TCI’s chairman and CEO, bought 32 million shares of TCI stock from the Magness estate. The shares carried a substantial 20 percent voting interest in TCI.
Three months after the sale, Magness’ sons sued the estate to get the sale overturned. One of the things they claimed was that an unidentified buyer had been willing to purchase the stock at a higher price but that the estate had ignored the higher offer, saying it came in too late.
As it happened, this allegation was absolutely true. What drove Malone crazy was that neither he nor his closest lieutenants could figure out who had made the higher offer. Clearly, Malone thought, he had a very serious enemy who had made a very earnest effort to challenge his control of TCI. Who the hell could it be?
Malone might have never known, except a month later, Roberts ran into Malone’s top lieutenant, Leo Hindrey, at a dinner for cable executives and told him that Comcast was the unidentified bidder, along with Bill Gates. Comcast was already in business with the Microsoft chief; four months earlier Microsoft had invested $1 billion in Comcast.
In the small boys club that, at the time, was the cable operator business, this attempt by Comcast to surreptitiously acquire a major stake in TCI was treachery of the highest order. Malone and Hindrey went ballistic.
“Bill Gates was never an issue,” Hindrey later told Mark Robichaux, author of the recent Malone biography “Cable Cowboy.” “He has a right to go after anyone; that’s business. But Brian broke the code. … You don’t do that in an insular business. In this industry you don’t screw with your friends. We’re all joined at the hip.”
Malone was equally upset. According to Advertising Age, the explanation Roberts gave to Malone was that Gates had told him at the last minute that he was going to make the offer regardless of Comcast’s participation. So Roberts and his dad, Comcast founder Ralph Roberts, claimed they could look after Malone’s interest if they joined Gates in the stealth offer to purchase the TCI stock.
Legend and lore
Malone, of course, would have nothing of that explanation, and his relationship with the Robertses remained strained for quite some time.
The Diller story is more well-known, and was documented in a number of publications at the time, including the Roberts family’s hometown newspaper, the Philadelphia Inquirer.
In 1994 Barry Diller, then chief of the QVC home-shopping channel, made a play for CBS in a deal that would have merged CBS and QVC. CBS was within hours of approving the deal when Diller flew in to the general aviation airport in Teterboro, N.J. Brian and his dad came up from Comcast’s Philadelphia home base to meet Diller’s plane and give him a letter saying Comcast was making a better offer to acquire the 85 percent of QVC they did not own. Brian and his dad never flinched as they quashed Diller’s dream to acquire and run CBS.
Standing up to Malone and Diller is indicative of someone who is clearly very competitive and who doesn’t like to lose. Someone who isn’t afraid of taking the ball and running with it. A tired sports cliche, yes, but in fact, a somewhat fitting one: Roberts was an all-America squash player in college and at 43 still plays the game.
What is also clear from these confrontations with Malone and Diller is that Brian works intimately with his closest business partner, who happens to be his father.
But last year was Brian’s year, as he emerged quite distinctly from his father’s shadow.
Brian led the second, winning takeover bid of AT&T Broadband, after first being rebuffed by AT&T and losing a bid for MediaOne to the telephone giant. He adeptly maneuvered a tricky, prolonged regulatory review and proved a tough negotiator by strictly limiting terms of an Internet service pact with America Online. Now that he’s at the helm of the newly merged Comcast Corp., his negotiating acumen again will be tested when he’s cutting deals with Hollywood’s most formidable content players.
Chip off the old Rock
Still, Brian’s dad, Ralph, now 82, is never far away. His office, adjacent to Brian’s corner digs, allows for a continuous, fluid rapport between father and son, who share a sense of awe about what they have achieved and what they must still do.
Brian quite simply and affectionately refers to his father as “my Rock of Gibraltar.” People who know them well say they share a quiet determination, commitment to common values and a low-key style that stands in sharp contrast to other bigger-than-life media executives.
“People ask me if I ever thought, when I bought [our first] cable system in Tupelo, Miss., with 1,700 subscribers [in 1963], that it would ever come to this-21 million subscribers,” said Ralph, wearing his trademark bow tie, a beaming smile and a thick crop of white hair swept to one side. Seemingly comfortable in his new role as resident sage and head of the board’s executive committee, Comcast’s soft-spoken founding chairman quickly added, “And I say, `Of course I did.”’
But behind the bow tie lies grit and cunning. As Diller once told Fortune magazine after the Roberts family stopped his CBS deal, “I saw the difference between the bow-tied Philadelphia gentleman and the tough-as-steel businessman.”
Brian has clearly inherited his father’s toughness as well as his style of conservative expectations, family values and ethics that have become premiums in today’s corporate America. Although there is no guarantee those qualities will facilitate the happy union of Comcast and AT&T, they will be a central part of the modus operandi for Brian, who is determined to continue managing Comcast like a family business, sort of a “local” national operator that just happens to have 21 million subscribers.
The Roberts family values are shared by Comcast Cable President Steve Burke, himself the scion of well-known TV business executive-former ABC executive Dan Burke, who forged a similar close partnership with Tom Murphy at Capital Cities. “We’re just going to keep our heads down and deliver,” said the younger Burke, an affable Harvard Business School graduate who is described by peers as highly skilled and capable of heading his own company but who instead remains loyal and very close to Brian.
Messrs. Roberts take pride in running a clean ship, in sharp contrast to the Rigas family, which operated Adelphia Communications. Some members of the Rigas family have been indicted on fraud charges. And the Robertses are fastidious about finances, determined to avoid the angst of Charter Communications, which after restating nearly $3 billion in earnings is fighting to stay afloat.
In fact, Brian recently spearheaded an unprecedented effort among rival cable operators to devise and sign off on voluntary accounting guidelines to calm investor confusion and concern.
“I don’t think you can cast all family businesses the same way,” said Ralph. In Comcast’s case, “Being a family-run business makes the employees feel like they belong,” he added. “Everyone has shared in our growth.”
Words of wisdom
Growth is one word one doesn’t associate with AT&T Broadband, whose cable systems have been plagued with problems. Brian and company are fully aware of the challenges they have. As an example what they are up against, consider this nightmare about the cable system in Sacramento, Calif.
About 18 months ago Comcast traded that
system in Sacramento to AT&T. At that time that cable system had about 350,000 subscribers and was growing 2 percent to 3 percent annually, with 42 percent operating margins. Cash flow was $280 per subscriber. With the merger, Comcast gets its old system back. Only now, it’s losing 2 percent to 3 percent of its subscribers, its operating margins have fallen into the mid-20s and its cash flow has dropped to $212 per subscriber.
Brian, a Wharton School finance grad, knows he must grow cash flow, reverse 500,000 basic subscriber losses and upgrade AT&T’s lagging systems before he can reduce $25 billion in debt and steadily roll out bundled digital services across a 38 million-home footprint. He insisted he’s approaching this “defining opportunity” with enough prudent assumptions, stopgap measures and wise counsel to avoid the financial and operational disasters vexing his cable peers.
Ralph said succeeding where AT&T failed requires, “We should promise less and deliver more. We’ll end up much more acceptable and believable to the whole world.” As a former advertising executive he knows what of he speaks, adding the golden rule that a company should “stick to the business you know.”
For his part, Brian described his job as “planning for Murphy’s Law,” referring to a painstakingly detailed 100-day plan for each of the AT&T systems, which collectively have lost more than half a million basic subscribers this year. Those systems were infiltrated last week by more than 120 veteran Comcast managers, whose two-year plan is to use $2 billion in upgrades to lift AT&T’s industry-low 26 percent margins to Comcast’s industry-high 40 percent-plus.
“My goal is to take this opportunity now and make the most of it, and set realistic expectations. Right now, we just need execution,” Brian said. “The first year or two are about the basics. One of the things I feel passionate about is that we’ve got to get from 26 percent margins at AT&T to 36 percent. If we take our eye off that ball, we’re making a huge mistake.
“We’re going to have more than 21 million subs. We’re going to serve areas in 17 of the top 20 DMAs. And we’ll be there for the next 30 years. As long as you’re financed properly, and you have the staying power and the ability to move quickly, that’s what counts. I have to say-and this is also my father’s perspective-that this is a marathon, not a sprint.”