His Firm Is on Rebound, Says HBO’s Fuchs

In the early 1980s, Home Box Office held a position of power in Hollywood. Considered the strongest force in the cable TV revolution, HBO caused a minor panic among movie studios as audiences shifted their movie-viewing habits from the theater to their home screens.

Then in 1984, Time Inc.’s pay-TV subsidiary began running out of new customers as audiences discovered they could rent those same movies sooner on videocassette.

Now, with the celebrating of its 15th anniversary, Chairman and Chief Executive Officer Michael J. Fuchs says his firm is on the rebound.

In an interview prior to his Tuesday address at a Hollywood Radio and Television Society luncheon at the Beverly Wilshire, Fuchs spoke about how HBO has changed to meet the changing needs of its audience, where the pay-TV network stands now and where it and the cable industry might stand five years hence.

Fuchs said that, despite the mid-’80s slowdown, HBO has “come back very strong”--with uncensored comedy (“When we do Sam Kinison, we don’t bleep Sam Kinison”), original movies and an experimental approach to programming.

“Two or three years ago, video people were writing off pay television,” Fuchs said. “HBO’s story over the past three years is sort of a comeback story.”

Fuchs said that the company, which reached its low point in 1984 when it gained only a few thousand new subscribers (the company had predicted 2 million), will this year have added “well over a million” new HBO subscribers by the end of 1987, bringing the network’s total subscribers to just over 20 million. Fuchs added that HBO and its subsidiary company Cinemax reach about half of all homes with cable.

Fuchs, who joined HBO in 1976 and became company chairman in 1984, said that “the cable industry is an $80-billion-dollar business--it’s more powerful than it was five years ago,” but predicted that it will take five years more for cable to be fully competitive with network television.

In other forecasts, Fuchs predicted the movie industry must become less reliant on large license fees from HBO, video, foreign distribution and other so-called “ancillary” markets and “to discipline itself on a cost basis.”

HBO recently won a bidding war for an exclusive five-year film package deal with Paramount Pictures beginning in 1988. Although agreeing to pay Paramount $500 million, Fuchs says such exclusive arrangements drive up the overall cost of acquiring theatrical films for cable. He has publicly chastised HBO’s major cable competitor, Showtime, for first demanding exclusive studio deals and putting the entire pay-TV industry in a bidding contest.

Fuchs said television’s most interesting sideshow for the next five years will be the network’s battle to maintain their power in an increasingly fragmented market. And, he added, “as long as (the networks) have to go for that broad audience all the time, there’s no way you’re programming can be as interesting as if you shoot for a narrower audience.”

Fuchs said that some quality network shows, such as the “L.A. Law” or “Hill Street Blues” would be popular on HBO, but the company cannot yet afford to pay the price to produce such programming. HBO did, Fuchs said, offer to pay MTM Enterprises “dollar for dollar” to take over production of “Hill Street” following its first low-rated year at NBC, but NBC decided to renew the show. “It might have been a much different show if we’d produced it,” Fuchs mused.

HBO also once considered taking over “Taxi,” but Fuchs does not regret having decided against it. “It had run its course,” he said.

Fuchs protested the fact that the press insists on judging cable by the same standards as it judges the networks--by ratings, rather than audience satisfaction. “We try to stand for something--that’s a concept that doesn’t exist in regular broadcasting,” he said.

Fuchs said that such programs as Saturday’s “Comic Relief ‘87” are part of that effort. “We all (in the cable industry) have a crying need inside of us to do entertainment that is more intelligent, more serious--to raise funds if necessary,” Fuchs said. “I try for that a little too much sometimes. Maybe I have more guilt.”

Along with the changes in HBO’s approach over the last five years, Fuchs said he expects his outspoken public image to change as well.

“I sometimes think (that image) is vestigial,” he said. “HBO was, and is less now, a very controversial company. We’ve fought a lot of battles along the way to get where we’ve gotten--it wasn’t easy getting in, and I was more willing to man the barricades.

“The (Radio and Television Society) speech is the last speech I’ll make for quite a while,” Fuchs added. “You get tired of hearing your own voice. For the right causes and the right issues, I’ll be outspoken--but I’ll probably be a little quieter for the next few years.”