Brian L. Roberts started the hard way in the cable TV business, climbing poles to string cable for new subscribers’ homes. He admits now that he had “trouble carrying the ladder. I was too weak. I was too skinny.”
As the boss’s son, however, he survived that summer job and returned to the University of Pennsylvania’s Wharton School. Competitive by nature, he became an All-American squash player. After his 1981 graduation, he returned to Comcast Corp. to work his way up a different ladder. In 1990, he was named president at the tender age of 30.
Today, Comcast is the nation’s fourth-largest cable TV operator, boasting 2.7 million subscribers, significant holdings in the cellular telephone industry and 1993 cash flow of $606 million. As much for its assets, the company is admired for the father-son team at the helm and its graceful preparation of the next generation of managers.
At 74, founder Ralph J. Roberts still controls 78% of the company’s voting stock. He is wealthy (with a net worth exceeding $400 million, according to Forbes magazine)--but not as rich or famous as media moguls Sumner Redstone, John Malone and Ted Turner. No matter. He’s the envy of many businessmen because he has an heir so eager--and well-equipped--to run the company.
In the last two years, Brian Roberts has championed a series of deals that look quite smart, and he is emerging as one of the cable industry’s ablest executives. During the recent takeover battle for Paramount Communications Inc., he showed a flair for shuttle diplomacy as he sought backers for the QVC Inc.-led bid. It was Roberts, for example, who first contacted the Newhouse family’s Advance Publications, which pledged $500 million toward the losing cause.
At 34, he has a knack for spotting new opportunities--and enlisting his father to clinch a deal. At his instigation, Comcast became an early investor in Nextel Communications Inc.'s new national wireless network. And it was he who initiated a successful effort to recruit MCI Communications as an equal partner in that venture four months ago, prompting the stock to soar. In 18 months, Comcast’s stake more than quintupled in value to nearly $1.1 billion.
“He and his father have one of the great things going. . . . They have complete trust,” says Barry Diller, chairman of QVC, in which Comcast is a major investor.
“It’s worked out better than we ever could have hoped,” says blunt-spoken Comcast Vice Chairman Julian A. Brodsky, who has served as the company’s financial wizard since the beginning. “Every so often, Ralph and I have to bite our tongues, you know, and hold back, but it’s clearly Brian’s show.”
Despite these successes, Comcast is at a crossroads. The issue: How to be a bigger player without relinquishing family control. If it is to move into the top tier of cable operators, Wall Street analysts say, Comcast needs a partner with deep pockets to upgrade its cable systems or acquire additional systems.
Until recently, it seemed the most likely partner would be a regional telephone company. But two big cable-telephone deals have collapsed in the past two months, and the short-term value of cable TV systems has dropped in the wake of 17% rate rollbacks ordered by the Federal Communications Commission.
For now, regional phone companies have cooled to cable deals, increasing the likelihood that cable firms will again find ways to do business together.
“The good news is the football team of cable is back together,” Brian Roberts says with characteristic ebullience.
Without naming names, he indicates that Comcast is considering various alliances, but not the outright sale or spinoff of its cable business.
A source outside Comcast spins one scenario: A long-distance carrier such as AT&T; or MCI could invest in Teleport Communications Group--20%-owned by Comcast--which operates fiber-optic networks that link businesses in 30 communities to long-distance carriers.
Such a deal would enable the long-distance-carrier partner to re-establish direct contact with consumers, while funneling telephone expertise and money to cable companies as they upgrade their systems for two-way data and voice transmissions. (Teleport’s other owners include Tele-Communications Inc., Continental Cablevision and Cox Enterprises; Time Warner has also announced plans to invest.)
Meanwhile, Comcast insists it can ride out the current rate-rollback storm.
It has about $500 million in cash at its disposal--the same amount once earmarked for QVC’s failed bid for Paramount. The company has always tried to keep cash on hand so it can maneuver quickly without begging a bank’s permission.
Despite the rate rollbacks, Comcast says it won’t skimp on capital spending to upgrade cable systems, a budget expected to total about $200 million in 1994. In the next 18 months, for example, the company expects to begin adding channel capacity to its Orange County operations, including the 43-channel Newport Beach system. And it will probably begin upgrading its 43-channel Ontario system in 1995.
In all, Comcast serves about 250,000 cable TV homes in such California cities as Simi Valley, Fontana, Santa Ana, Seal Beach and Buena Park.
Through the years, Vice Chairman Brodsky has creatively met the company’s financing needs, borrowing from insurance companies, forming limited partnerships or issuing industrial development bonds.
“There’s never been a project around here that wasn’t done because there wasn’t money to do it--never,” says Brodsky, who helped recruit two younger executives to fill his own shoes, though he is vigorous at 60.
Comcast owes most of its success, however, to its low-key founder, who commutes daily to his chairman’s office from a farm 55 miles outside town. Ralph Roberts came to Philadelphia as a teen-ager and, like his son four decades later, graduated from Wharton before serving as a Navy lieutenant during World War II. He worked in an advertising agency and at Muzak Corp. until joining Pioneer Suspender Co. in 1950. He rose to the chief executive’s job before deciding to sell the company and form his own venture capital firm in 1961.
Roberts was a good listener, and his easy demeanor made his office a harbor for entrepreneurs spinning their ideas. In 1963, he agreed to buy the cable system in Tupelo, Miss., on the condition that the broker, a former Jerrold Electronics executive named Daniel Aaron, stay on to run it. Aaron consented, and Brodsky, the self-described “young tiger” who had been working as Roberts’ accountant, asked to join the team. (Aaron retired from Comcast in 1991 but remains a director and consultant.)
Brodsky vividly recalls some of their escapades in Mississippi in the mid-1960s.
“It was a very strange time for a Jewish guy from the North to be wandering around Mississippi at the height of the civil rights movement. I look like an agitator. I talk like an agitator. Every cop thought I was an agitator,” Brodsky says with his big laugh.
But the Comcast executives moved comfortably enough in Mississippi clubs where gambling and drinking went on. And it was in a Meridian club that Roberts picked up crucial information on the likely winner of that city’s franchise, Brodsky recalls, giving rise to the erroneous story that they won a cable system at the crap table.
In Mississippi or Pennsylvania, Roberts “can relate to people marvelously,” Brodsky explains. “And from a business sense, he has enormous strategic insight as to what we should be doing, when. Going into the cable business, when to make acquisitions, when to expand.”
In 1971, Comcast broke out of Mississippi with the acquisition of franchises in western Pennsylvania; the following year, the company offered shares to the public. As young Brian was joining the company at the start of the ‘80s, Comcast had about 200,000 cable subscribers.
The fourth of Ralph Roberts’ five children, Brian was the only one who wanted fiercely to work at Comcast. His father dispatched him to Trenton, N.J., as an assistant manager, then to a larger system in Flint, Mich., before bringing him home in time to participate in a series of bold corporate moves.
In 1985, Comcast offered to buy the much larger Storer Communications’ cable unit. Although spurned, the firm was soon invited to join a consortium of cable companies that bought Group W Cable’s systems. In 1988, Comcast got its second chance to buy Storer--by teaming successfully with industry leader TCI in a $1.5-billion bid. That same year, Comcast invested in a New Jersey-based cellular telephone company.
Although Comcast passed up the chance to invest heavily in Turner Broadcasting Corp. (“a mistake,” Ralph Roberts says now), Turner invited young Brian Roberts to join his board.
“For someone his age, I don’t know anyone who’s had that kind of exposure,” says Home Box Office Chairman Michael Fuchs, also a Turner director.
Impressed by the father-son team, some moguls have sent their own children to Comcast for advice. Brian Roberts credits his father’s courteous, optimistic nature for easing the way: “He’s never going to put you down. You’re entitled to youthful enthusiasm and youthful mistakes.” By the same token, however, the younger Roberts says, “I think I understand this is his company, and it always will be.” Beneath his father’s relaxed demeanor is “a tremendous tenacity and will to get (things) done.”
Comcast’s cellular telephone business is a case in point. Ralph Roberts kept his eye on billionaire John Kluge’s Philadelphia cellular system--and pounced when it came on the market in 1991. In a single weekend, Comcast agreed to pay $1 billion. Comcast has been rewarded with a cellular division that posted a 40% gain in revenue last year.
“They’re very smart, and they’re wonderful guys,” says Gordon Crawford, senior vice president of Capital Research Co. in Los Angeles. Capital affiliates own more than 8% of Comcast’s stock.
Nevertheless, the company has a reputation for driving tough deals. Earlier this year, for example, Comcast acquired the remaining 8% of the Philadelphia cable system it didn’t own by paying $95 a share at a time when Paul Kagan Associates valued the company at $114 per share.
And John Alchin, now Comcast’s treasurer, recalls that he didn’t lend to Comcast when he was a Toronto Dominion banker because Comcast was accustomed to negotiating low fees.
Like most cable TV operators, Comcast would like to have a bigger investment in programming. Other than a small stake in Turner Broadcasting and 11% of E! Entertainment Television, Comcast’s only significant holding is 15.5% of QVC.
The QVC venture reflects the highly personal, father-son involvement in any Comcast investment.
Ralph Roberts was an early supporter of QVC founder Joseph M. Segel; he had admired Segel’s prior venture at Franklin Mint, which sells collectibles through upscale advertising. He urged Segel to start an upscale shopping network. Comcast invested cash and Roberts called all his friends in the industry, urging them to put QVC on their cable systems.
When Segel decided to leave QVC in 1992, however, it was Brian Roberts who embarked on a campaign to recruit former Hollywood executive Barry Diller as the new QVC chairman and Comcast’s partner in a voting trust.
Brian Roberts says he has no regrets about QVC’s wrenching pursuit of Paramount, despite the outcome.
“We lost with dignity, if there is such a thing,” he says. “I think QVC and ourselves both are going to see more opportunities, now that the world knows that both companies want to expand into programming jointly.”
In pursuit of such deals, he now travels on the company’s 50%-owned Hawker jet, which is capable of transatlantic flights to the United Kingdom, where Comcast operates three cable and telephone systems. Getting home to Philadelphia and his wife and three young children is a priority.
But his itinerary also includes Washington, where the nation’s telecommunications policy is being thrashed out. “Brian understands how policy is made in Washington, and, unlike a lot of older cable CEOs, he is willing to become directly involved in the process,” says U.S. Rep. Rick Boucher (D-Va.), who advocates more competition between phone companies and cable operators.
“He has not personalized the fight with Washington as some have,” says Larry Irving, assistant secretary of commerce for communications and information. “I think he’s emerged as one of the bright young leaders of that industry. He’s the next generation.”
Comcast Corp. At-a-Glance
* Headquarters: Philadelphia, Pa.
* Chairman: Ralph J. Roberts
* President: Brian L. Roberts
* Employees: 5,327
* Major products: Fourth-largest operator of cable television systems in the United States, with more than 2.7 million subscribers; large independent provider of cellular telephone service.
* 1993 revenue: $1.3 billion
* 1993 loss: -$859.2 million
* Loss per share: -$.46
* Friday closing stock price: $16.50, up 12.5 cents.
Source: Bloomberg Business News; Standard & Poor’s Corp.