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A CNN pioneer scorned

Reese Schonfeld's assistant trots into his small Rockefeller Center office with a fresh edition of Newsweek, handing the former CNN president his change from the newsstand. Schonfeld hunts for a story he was interviewed for the previous week, a harsh assessment of the falling fortunes of the news network he helped create.

Disappointment. The reporter didn't quote him. Schonfeld had characterized CNN's recent attempt to revive its Nielsen ratings as " 'an act of desperation. 'I thought sure she'd use that."

His desire for a bit of ink is fueled by more than a desire to publicize his forthcoming book about CNN, Me and Ted Against the World. Yes, Schonfeld is still a little angry. After starting CNN from scratch on a minuscule budget, Schonfeld was axed in a control struggle with Turner Broadcasting System Chairman Ted Turner.

Then network brass virtually airbrushed Schonfeld out of the group photos, just like a disgraced Kremlin apparatchik. Official versions of CNN's history tend to lightly detail Schonfeld's role in launching the breakthrough news channel: A search of transcripts, for example, finds only a slender mention of him during last year's 20th anniversary retrospective.

Schonfeld does gloat over CNN's long-term ratings slide from a 1.0 when he was running it to a 0.3-0.4, a decline exacerbated by competition from Fox News Channel (whose parent News Corp. also owns Me and Ted's publisher, Harper Collins) and MSNBC. But he's also angry that Turner Broadcasting executives let his baby get tarnished. "They haven't had a new thought in 15 years."

Schonfeld worked at UPI and started a video news agency for independent television stations, before Turner tapped him to build CNN from scratch. He started with no sets, no journalists, no technicians, no bureaus and not much money. Schonfeld has gone on to other things, helping launch Cablevision Systems' local News 12 operation and start up The Food Network. That doesn't matter. "Everything's an anticlimax since then," Schonfeld says.

He hadn't thought about writing a book until famed ex-CNN reporter Peter Arnett called to say he was collaborating on a CNN book with former network Executive Vice President Ed Turner, whom, as Me and Ted

makes clear, Schonfeld loathes. "I didn't want to do a book," Schonfeld says. But after seeing three other books on Turner come out over the years-one company-authorized, another largely drawn from newspaper clippings-"I figured that, before they get their airbrushed version out, I should write a book."

He started out collaborating with ex-CNN reporter Chris Chase, but they parted ways last year. Schonfeld rewrote the effort and she dropped her name from the cover.

The book doesn't seem as vengeful as some current and former CNN and Turner Broadcasting executives have feared. But he certainly takes his shots while relating the adventures of CNN. Still, Schonfeld says there are only three people in the book he dislikes: Ed Turner, CNN Chairman and CEO Tom Johnson and TBS Chairman Terry McGuirk, whom he calls "the three people most responsible for making CNN a .3-.4 network," instead of the 1.0 Nielsen-rated network it was when Schonfeld was there.

An excerpt from Me and Ted Against the World
starts on page 86.

Who invented CNN? People still ask: "Whose idea was CNN? Yours or Ted's?" So far as I know, it was Gerry Levin's. He conceived of it as an opportunity for HBO, the Time-Life division that he ran. The year was 1977.

In 1975, I had wanted to bring HBO into the fold of my Independent Television News Association [a news service for TV stations unaffiliated to a network]. We were just starting ITNA; we had a budget of $1 million a year. I had nine member stations each putting in $100,000. HBO would've been the 10th. We needed their money.

I told Stu Chismar, who worked for Levin, that HBO could join for $100,000. Chismar wanted to know why HBO would want to join ITNA; they didn't do news. I said to him, "Someday you'll want to, and this will get you into the club. It will give you access to news whenever you decide to bring out your news service." But back then, HBO was $20 million in the red, and they bowed out. ITNA's nine members raised their dues to $110,000 a year, and we rolled out.

In 1977, Levin decided the time had come for an HBO 24-hour news network. He approached me at ITNA through Bob Weisberg. Weisberg and I talked seriously for several months and then met with Levin. He gave us the go-ahead and asked me to take it to the ITNA board.

My ITNA independent station owners were a pretty colorful bunch. There was a former used-car dealer from Sacramento, an ex-fruit and vegetable peddler who had turned his company into the largest independent of them all, and a family whose most important member was a major Las Vegas casino figure. There were also more-conventional owners like the Chicago Tribune Co. and Cox Enterprises. They were the guys who got their kicks out of Ted's anti-news rants. I believed Ted's rants, but I had never taken him seriously about anything else.

The ITNA board consisted of the general managers of the ITNA member stations. They'd heard just enough about cable to be afraid of it. They didn't want to give it "their" news. I argued that the HBO contribution would make us a much better news service: They'd all have better news shows, they'd get better ratings. They still refused to give "their" news to their rivals. In desperation, I suggested that we might take an ownership position in the HBO project. They still didn't want it. Jim Coppersmith, the GM of WNEW New York, spoke for the Metromedia stations. They had four votes out of nine members, and Coppersmith picked up a fifth. "Cable is the enemy," he said. "I will not let them kill me with my news and then piss on my grave."

After ITNA said no, Levin continued to ponder the idea of a 24-hour news service. Weisberg kept calling, and I referred him to other people who might help him. HBO spent a few dollars doing schedules, business plans, sample reels. Weisberg, who had fallen in love with the idea, was waiting for the go-ahead from Gerry. Early one morning, he got a call. Levin said, "I've just gotten out of the shower, and I get my best ideas in the shower. I've decided we're not going to do news." When Doris Weisberg, Bob's wife, told me the story, she said, "If I were Gerry Levin, I'd never take a shower again."

That was well before 1996, when Time Warner bought CNN along with the rest of TBS. In the end, Gerry got what he wanted-it just cost him a lot more money. Regardless of whose idea CNN was and who wound up owning it, it was Ted Turner who had the balls to start it.

Broken promises

I'd been conned. Ted didn't have the money to do CNN. Recruiting me, he'd boasted of his assets. He had the billboard company coining money. He had the Superstation already in the black and making more money every month. He had a television station in Charlotte that he'd just sold to Westinghouse for $23 million or $24 million. He'd doubled his money in gold. He had $10 million in peat bogs in the ground on his plantation (Ted believed that oil prices were so high that peat would replace it for home heating). And he had a $30 million line of credit from First Chicago Bank. What he didn't tell me was he had no money.

When I first arrived at CNN, Will Sanders was the CFO of TBS. He'd had the job since 1970. Every time Ted needed money, Will found it for him. Paul Beckham, Will's assistant, says that, when he got there in 1970, they had no money and no financial records to help raise money. Ted spent everything as soon as Will got it. Ted bought the Braves; bought the Hawks, the Atlanta NBA basketball franchise; bought the Charlotte television station. Now he wanted to start CNN, and he still had no money. Beckham says, "Ted spent all we got as soon as we got it."

Just as I was arriving at CNN, when Sanders was still CFO, First Chicago called in its loan to TBS. Ted had made a typical Ted speech in Chicago attended by some First Chicago executives: a combination of charm and attack, sometimes brilliant, sometimes incoherent. Afterwards, I learned that a senior First Chicago executive asked his loan officer, "Why are we backing this guy? He is a very peculiar person. Let us end this relationship." But the bank was very nice about it. The loan officer gave TBS a year to pay off the loan.

I didn't realize how bad things really were until we were purchasing the electronic cameras for our news crews. Ikegami was the industry standard. Sony was bringing out a new lighter product. RCA was playing catch-up. It offered the "Hawkeye." The Hawkeye was cumbersome and awkward. [CFO Bill] Bevins said, "Please buy the Hawkeye." "Why?" I asked. "Because they'll give us a lease-purchase deal." So we got to pay $500,000 over five years, and our crews got to carry five extra pounds for five years. Even without urging, I was frugal. We bought used furniture. We bought used tape stock from NBC for our tape library. When we covered the 1980 convention, I forced our Atlanta people to fly to Washington "hopscotch." Piedmont Airlines offered a considerable discount if we would fly to New York on one- or two-stop flights; the talent was unhappy.

By the time we got on air, almost all the cash was gone. Beckham recalls going into Bevins' office one day and telling him, "We got no money in the bank, and I don't know what to do." Bevins said he knew what to do and, without looking up the number, punched in "Dial-a-Prayer." After a minute, Bevins hung up and said, "The line is busy." Later that week, Turner got a refund for taxes he never paid in the first place. It got the company through the next couple of weeks. Later-much later-Ted paid the money back.

Just before we launched, we got another gift from God. Bill Daniels, one of the great pioneers of the cable industry and owner of many cable systems, offered to lend Ted more than $10 million with a promise of more if needed. But the loan was convertible into stock, and Ted had earlier learned the hard way what happens when you give up stock. He turned the offer down, and we remained impoverished.

Vintage Ted

Just as the broadcast networks' arrogance helped me with news guys, network arrogance helped Ted with advertisers. Ted and George Babick took American Home Products to lunch at the New York Yacht Club-Ted was host, attended by AHP's media chief and four of his aides. Showing his guests around the club, Ted stopped in front of the glass case that held the America's Cup he'd won on his boat Courageous.

Babick says, "Ted was in his element. He led the way upstairs to a private dining room, and everyone sat down at a wooden conference table that had been polished so many times the dark wood seemed to have the depth of a mirror. Ted said it was too warm and took his jacket off. He looked at the AHP media boss. The boss slowly took off his jacket. The four aides took their jackets off, too. Ted loosened his tie. The AHP boss loosened his tie. His assistants followed. Now Ted had them. By then, he was walking around the tabletop and stopped in front of the vice president of American Home Products. Ted said, 'I understand you've just signed a deal with NBC. Wasn't it $250 million over five years?' The vice president said the figure was in the ballpark. 'Did the president of NBC call you to say thanks?'

"The room was silent. Ted spoke again. 'You are now the biggest client NBC has, and the president didn't call? Who is the president of NBC?'

" 'Fred Silverman,' somebody mumbled.

"At this point, the executive heads are turning in unison as they follow Ted around the table. Ted walks faster. 'Fred Silverman. It makes no difference who their president is because he's gonna get fired anyway. But'-Ted paused and smiled- 'no one is gonna fire me because my name is over the door. And I'm asking you guys to work with me to sell your products so you won't have to pay such outrageous prices to NBC.' He had them in the palm of his hand," Babick says. "We got a big order."

Not all sales went that well for CNN. We had trouble in Detroit. Before we went on the air, David Koff, our Detroit salesman, tried the Big Three. GM and Ford passed. Chrysler, teetering on bankruptcy, wanted us but couldn't afford us. They had cars they couldn't sell. We had airtime we couldn't sell. It was a marriage made in heaven. They gave us a half-million dollars' worth of cars and vans for our bureaus and cameramen. We gave them one 30-second spot every two hours for a full year.

By the fall of 1980, Koff had still failed to bring in hard cash from the automobile industry. Ted flew into town with Jim Trahey, his ace sports salesman, who knew all the automobile guys. Koff remembers driving Ted and Trahey through a pouring rain to Chevy's advertising agency. Koff and Trahey were in front, Ted alone in the back seat. The atmosphere was tense. Ted was beating up on the sales guys. "What's the matter with you guys. We're putting out a good product. We're getting more homes. And you can't sell it." Finally, Ted quieted down. Koff tried a joke he thought would break the tension. Trahey laughed. Ted went crazy.

"You think it's funny? You guys are laughing, and you can't sell a dollar's worth of advertising in Detroit? You're fired. You're both fired." It was still pouring rain. Koff pulled over to the side of the road. He looked at Ted and said, "Get the hell out of my car." "You can't do this," said Ted. "You just fired me, and this ain't the company car," said Koff. "Get out." They were on a superhighway, circling Detroit in the midst of a rainstorm. Ted knows when he's beaten. "I didn't mean it," said Ted. "You know I didn't mean it. I'm always firing you guys." Koff relented but not until he got Ted to give him and Trahey an extra hundred dollars a month on their car allowance. Chevy did not buy.

Woe is Ted

I can think of three different reasons why Ted merged with Time Warner. For five years, he had been telling the people close to him that TBS was too small to survive on its own. He'd been looking to buy other companies, and it wasn't happening. So he decided, if he couldn't buy, he might as well sell.

Two, there's the frustration; the board sat on top of him. John Malone praised his creativity and energy but killed his deals. Maybe he'd have better luck working for just one boss, Gerry Levin.

Three, there's Ted's old CBS plan: Let them buy him, be the biggest stockholder, and take over the company. The Trojan horse, the-mouse-swallows-the-elephant plan.

Gerry Levin had his own reasons for buying Turner: Disney had just taken over ABC, Westinghouse Electric had just bought CBS. Gerry saw that, in order to survive, media companies would have to grow larger. He saw TBS as his best opportunity and offered $7.5 billion for the company. The whole deal took only five weeks.

At first, Ted was feisty. Shortly after their companies merged, Ted Turner, Gerry Levin and Dick Parsons flew down to Atlanta to see a Braves game. On the flight, Ted turned to Levin and said, "Gerry, you're Jewish, aren't you?" Gerry said, "Yes, Ted. Do you have a problem with that?" Ted said, "No. I always wanted a smart Jew to manage my money." Then Ted turned to Dick Parsons, the COO of Time Warner, who is black, and said, "Now Dick, I don't even have to ask what you are. All I can say is you must be one talented son of a bitch to get where you've gotten."

Turner was marking his territory. He was telling Levin and Parsons, who were his bosses on paper, that he could say anything he wanted to them and there was nothing they could do about it; he was the largest shareholder. [Through a spokesman, Levin and Parsons denied to BROADCASTING & CABLE that Turner had made any such remarks.]

Whether or not, Ted was trying his 1982 strategy-let them buy me, but I'll out muscle them with the board, and I'll take control of the company-he never was able to move up to the number-one spot. He had not reckoned on Levin's staying power.

Gerry has done three mergers over the past dozen years. First, he merged with the past (Warner Brothers), then with the present (Ted Turner and TBS), and now he's planning to merge with the future (AOL). In that time period, he's also promoted himself to CEO of the combined empire. No matter who owns how much stock, Gerry's always emerged as CEO. Whenever the stock flagged, Gerry went out and merged with somebody else, the stock soared, and he kept his job.

After Gerry arranged his merger with AOL, he had even less reason to be concerned about Ted. In public, he deferred to him; Ted kept his seat on the dais at all the press conferences, but in reality his power was gone. Even before the merger, Gerry Levin and Time Warner were taking a hand in CNN. When Rick Kaplan couldn't get approval to spend $24 million on new sets, he went up to Time Warner and got his money. When Kaplan and Lou Dobbs battled because Kaplan broke into Moneyline
to carry a Clinton speech live, Time Warner backed Kaplan and let Dobbs resign. After Dobbs left, Gerry actively tried to recruit John Huey, the editor of Fortune, to take over CNN/fn, but Huey stayed at Fortune.

Ted had been "marginalized." He had agreed to vote his stock for the AOL merger without assuring himself of any position in the new company. His careless negotiating style had cost him whatever leverage he might have had. The patient Gerry had outwitted and outwaited the impulsive Ted. When Levin and Steve Case, the chairman of AOL, announced a new table of organization for the merged company, Ted no longer had an operating role. He had not been consulted. At CNN's 20th anniversary party, Levin and Case assured Ted that he would have a "much bigger canvas, he's going to be involved in every aspect of this whole company." Case said that Ted Turner has been his hero for 25 years. Everyone made nice. Ted knows what soft-soaping is and knows when he is being "handled."

I see Ted as a sad, almost tragic figure. He is King Lear after Lear's daughters have finished with him. How did it all happen? It started when he paid much too much for MGM. Then he had to take money from the major cable system owners, and they took seats on his board of directors. He couldn't spend more than $3 million without their consent. No longer could he make major strategic decisions.