NOW, CHUCK DOLAN WANTS TO BE MR. NICE GUY
It was jarring enough that Congress spent the summer reregulating the cable industry. But when Charles F. Dolan tuned in to his own 24-hour news channel recently, he was hopping mad. The chairman of Cablevision Systems Corp. in Woodbury, N.Y., watched as News 12 Long Island gave subscribers plenty of airtime to rail against his company and cable TV in general. "We're trashed more by News 12 than by any other medium," he complains.
That's saying something. Not only is News 12 owned by Cablevision, but the station's news director is Dolan's 41-year-old son, Patrick. The elder Dolan considers it a matter of principle to give Patrick total editorial independence. Often, though, that means getting slammed. For years, Chuck Dolan has been one of cable's bona fide visionaries. For just as long, he has been a lightning rod on Long Island for consumer complaints about hardball tactics and skyrocketing cable rates. Patrick certainly isn't alone when it comes to criticizing his father. And Chuck knows it.
The Dolan family's conflict neatly sums up the dilemma facing the entire industry. While entrepreneurs such as the 66-year-old Dolan have taken a no-holds-barred approach in seizing opportunities and developing technologies, they have also irked subscribers by paying for their dreams with spiraling rates. On Oct. 5, consumer anger became federal law: Congress voted to regulate the industry's ability to raise rates. Now, says Dolan, the time has come to mend fences. "The public feels we're illegitimate and exploitative," he admits. "The public has to be on your side."
If history is any guide, Dolan's new attitude may augur a general softening of the industry's posture. After all, the soft-spoken, one-time radio producer has spent much of his career setting the cable agenda (table). In the 1960s, he was the first to offer sports programming on cable. He was also the first to air movies on pay cable, starting the channel that evolved into Home Box Office. And with News 12, he kicked off the recent trend toward regional cable-news channels. "He is one of the great pioneers," says John Severino, former president of the abc Inc. television network and the Prime Ticket cable network.
BRASH PREDICTION. Yet Dolan stumbled in his most recent venture because he couldn't square his technological ambitions with market realities. Last summer, he and NBC Inc. teamed up to offer round-the-clock coverage of the Barcelona Olympic Games on pay-per-view TV. Dolan brashly predicted that 2.5 million viewers would pay $125 for the Triple-Cast. But only one-tenth of that figure signed up, and the TripleCast lost $120 million. Cablevision took a $50 million hit, while media analysts figure NBC absorbed $70 million.
Dolan blames the torpid economy. But his own partners now wonder whether the concept was fundamentally flawed. "We ran into a lot of different perceptions about television that caused us to have a much lower response rate," says Robert C. Wright, president of nbc. Wright remains enthusiastic about pay-per-view programs, though he doubts Dolan's concept would ever work without some radical rethinking.
The bigger question is: How can a $603 million company afford to lose $50 million on a single project? Certainly, Cablevision--already a highly leveraged public company--can only take such risks because of the piles of cash it extracts from subscribers. Some consumers hope reregulation will put the brakes on such behavior. "We're going to go after him," says Henry Schaefer, an angry customer in Huntington, N.Y.
Dolan doesn't think the bill is Jeffersonian legislation. It is muddled, he says, and cable operators will contest parts of it in court. But he admits it will push him to change how he prices his services. And he insists he is serious about healing his rift with the public.
He better be. Dolan and his competitors need the support of subscribers as they move into an increasingly expensive future. Cablevision, for example, is spending $112 million to rewire 6,000 miles of its cable network with fiber optics, a technology that will allow it to boost its number of channels from the current 38 to 54, and eventually 150.
Further down the road, fiber optics will allow Dolan to offer interactive programming. That's a potentially lucrative market, since Dolan could offer a panoply of new services such as home shopping or game shows. To sell such new services, though, Dolan must convince customers he's not just trying to push through another rate hike: "These days, new channels are not seen as something of greater value, but as evidence of abuse," he says.
NEW BUZZWORD. Dolan has always taken the risky path. He moved to New York City in 1952 following a stint as radio producer in his native Cleveland. By 1961, when cable TV was still a Buck Rogers concept, he began selling it in Manhattan. After starting the predecessor to HBO, Dolan sold out to Time Inc. in 1973. As part of that deal, he picked up some cable systems in Long Island, which he used to form Cablevision.
The regulatory squeeze has not chilled Dolan's determination to innovate. If he can win over new customers, he figures he can hawk futuristic concepts such as a mobile telecommunications system that would compete with cellular phones. His current buzzword is PCN, for personal communications networks. Dolan wants to supply customers with portable telephones that send and receive signals via the airwaves and cable. The system would allow customers to call anyone, anywhere, by hooking into regular phone lines as needed. While some analysts doubt PCN will ever be a big business, Dolan is bullish. He is testing PCN in several systems right now.
Despite an increasingly crowded cable spectrum, Dolan isn't giving up on his first love, either: cable programming. Staffers at Cablevision's Rainbow Programming Holdings Inc. are drawing up plans for three new cable channels. While Dolan is still vague on details, he says one channel will offer children's shows. It's a terrible time to start a new channel, but Dolan says he wants to be ready with offerings when channel capacity expands.
One measure of Dolan's interest in programming is that he recently named another son, Jim, CEO of Rainbow. With Jim Dolan's appointment, Cablevision has become more of a family fiefdom than ever. In addition to Patrick and Jim, son Thomas runs a Cablevision system in Suffolk County, N.Y. Says Dolan: "The company culture and our family life have intermixed for so long that this was probably unavoidable."
Jim agrees. With HBO and other new cable ventures the subject of dinnertime conversation, a career in cable seemed the obvious course. And while the News 12 experience shows that Chuck and his sons are all business at the office, they avoid friction at home. Chuck even crews for son Jim on the family's two racing yachts. "He's O.K. at taking orders," Jim insists. Deference doesn't come naturally for a man used to being the skipper. But Chuck Dolan is learning that you have to listen, not least when it comes to your customers.MILESTONES OF A TELEVISIONARY
Dolan pioneered sports on cable, offering New York Knicks and Rangers games to
subscribers in 1967
HOME BOX OFFICE
Invented the granddaddy of pay cable channels, selling it to Time Inc. in 1973.
It later evolved into HBO
News 12, launched in 1986, was the first 24-hour regional news channel
Dreamed up the money-losing pay-per-view coverage of the Barcelona Olympic
Games in 1992
Mark Landler in New York