Iron Mike

Mike Pandzik awoke one morning in early August to find that for the first time in 20 years he had nowhere to go, having retired as president of the NCTC. But he’s still close enough to the co-op to have strong feelings about its future. As founding president of the National Cable TV Co-op, Mike Pandzik has been the group’s face from the moment it launched in 1985 to this past Aug. 3, when he left his post. Executives inside and outside of the NCTC give Pandzik all the credit for growing it into a small-operator powerhouse that represents more subscribers than any MSO other than Comcast. With more than 1,100 operators, representing 14 million subscribers, NCTC enables even the co-op’s smallest members to get the same volume discounts on programming and equipment as their larger MSO cousins. Of course, it wasn’t easy. There was a time when just about everyone associated with the co-op thought the idea wouldn’t work. Hired from HBO in 1985, Pandzik was unable to convince HBO—or other networks—to deal with small operators collectively. And it was tough to convince operators—beyond the original 12—to support the group. NCTC hit bottom in the summer of 1986—just a year after Pandzik launched the co-op from his Kansas kitchen. Though he’d cut deals with several smaller networks, like The Weather Channel and the Christian Broadcasting Network, the co-op’s bank account had dwindled from $145,000 to almost nothing. The problem was that Pandzik had to wait several months before money started flowing in from those initial programming deals. That’s when Pandzik went to the board and asked for a one-time assessment to save the co-op. The 12 member companies agreed to pitch in $1,200 to $1,500 each—a move that effectively saved the NCTC. "That was the last time I ever had to go back to the board for more money," Pandzik says. "We’ve never had dues in almost 21 years. It’s the closest thing to perpetual motion you’ll ever see. You pay a one-time initiation fee to join and that’s all you’ll ever pay." That didn’t mean NCTC was out of the woods. It still wasn’t able to convince bigger networks, like HBO and Showtime, to deal with the co-op. They preferred to deal with small operators individually rather than a bigger entity that could demand cheaper rates. NCTC muddled through until it was able to get a clause inserted in the 1992 Cable Act that persuaded network groups to begin dealing with Pandzik’s group. The clause effectively said that programmers could not unfairly negotiate with cable operators. Behind the scenes, several politicians twisted enough arms to get programmer holdouts to deal with the co-op. Now sporting the size—if not the negotiating power—of the second-largest MSO, NCTC has support from operators and programmers. Small operators, in particular, are able to cut deals on programming and, now, equipment that they’d never be able to get on their own. And programmers, for the most part, treat NCTC like a big MSO. Though some networks still don’t deal with the co-op (such as Lifetime and USA), most other programmers offer NCTC discounts similar to bigger MSOs. It’s not a coincidence that NCTC members pay the same rate for ESPN as Cox. A few weeks after stepping down as NCTC president, Pandzik spoke with CableWORLD about his career and the co-op’s future. CW: What should be the top priorities for your replacement? Mike Pandzik: The new person needs to continue to work with the American Cable Association and try and get retransmission consent fixed. He or she needs to keep trying to find lower-cost solutions so the smallest cable systems can become fully digital. Third, he or she should figure out a way to do video on demand across the breadth of the co-op. The last big challenge is to take another shot at trying to figure out if regional master head-ends can work. The co-op represents about 8,000 cable systems in all 50 states and every U.S. territory. Almost every one of them has its own head-end. When you buy gasoline, they don’t have a refinery out the back door. Why does every cable system have to have its own discrete head-end? CW: Has there been any traction on this? Pandzik: The head-end guys hate this kind of talk. Why not set up 12 or 15 or 20 master regional head-ends geographically spread out across the country that carry every service in that area? You could open up this whole area of advertising and sell it almost by ZIP code. CW: How do you see the co-op evolving in the next five or 10 years? Pandzik: The co-op is probably as big as it’s going to get. It can probably double the sales volume with the business it’s already got over the next five or 10 years if every member buys everything it needs for its systems through the co-op. A good example of possible growth is with motor vehicles. Our members are probably buying between 5,000 to 8,000 trucks per year. If you can figure out which buttons to push to get every member to buy their trucks through the co-op, you’d be one of the biggest buyers in the country. You can get prices down at the bottom. The phone companies haven’t bought trucks locally in 40 or 50 years. CW: Charter, Adelphia and Insight are members. Should NCTC be looking at signing up other big MSOs? Pandzik: While it’s nice to have the big ones join, they don’t come without baggage. The co-op is already so big. We have about 20 million basic subscribers. We may already be at the bottom of a programmer’s rate card. To add another couple of million subs here or there often does not change the rate at all. Since we’ve always prided ourselves on paying our bills promptly and in full, with a new big member company, we would take on some financial risk without necessarily getting more savings for other members. CW: What have been some of the toughest program deals for you to close? Pandzik: The more money that was involved, the tougher they were to do. The pay-TV deals were always difficult. The ESPN deals were difficult. CW: Who are the nicest programmers to deal with? Pandzik: The easier deals were with the brand-new networks. There are certain network groups that have great people working for them. ESPN is one of those. Discovery historically has been one of those outfits. The co-op has good friends at HBO. I’d also put The Weather Channel in that group. CW: What cable industry execs are invited to your ideal dinner party? Pandzik: My old friend from HBO, Les Read. One of the most interesting guys I’ve met in the business is ESPN’s Sean Bratches. Longtime cable veteran John Hagerty is a friend. A former board member who’s a director with The Outdoor Channel, Ray Miller, is a true gentleman of the business. And Abbe Raven at A&E—I’d love to have her and her husband over anytime. In the Interim A member of NCTC’s original board of directors, Tom Gleason became interim president when Mike Pandzik retired in August. He also serves as EVP for the family-run rural operator NewWave Communications. Gleason has a slightly different take on the NCTC’s priorities than Pandzik does. CW: What should be on the new president’s to-do list? Gleason: One of the things that the new person needs to be able to do is develop a relationship with the larger MSOs. The larger MSOs need to fully understand the plight of the small-to-midsize operators. They need to understand that their business is better when this side of the industry is healthy because if all the little guys go out of business because of competition, that makes the big guy’s competition stronger. No. 2, there are some staffing needs they need to address. In the programming department, these programming agreements have become much more complicated than they were in the past. We need some contract administration help that we don’t currently have. Third, the new person has to make sure that the relationship remains solid between the NCTC and the ACA. CW: Where do you see the NCTC going in the next five years? Gleason: We’ll continue to do longer-term deals. The different technologies that have come along are a real challenge. We have to be out in front of the technology here and not be followers, which we’ve kind of been in the past. We don’t currently have any of the VOD deals that we really need to have. We formed a hardware advisory group to allow our hardware department to start buying more sophisticated gear rather than just the commodity stuff. CW: How has the NCTC evolved over the past 15 years? Gleason: At first, programmers didn’t treat us as an organization that was like an MSO of that size. But we got better deals than we could get on our own. As contracts expired and we did renewals, more programmers came to the table and saw the advantages of dealing with all these thousands of operators as a group. The contracts we see today bear no resemblance to the contracts we had 10 years ago. CW: And now you’re cutting deals for more than just programming. Gleason: Mike always saw this as more than just a program-buying group. He brought in people to start buying hardware some years ago. That now has become a huge part of the organization. CW: If the NCTC is so closely associated with Pandzik, how difficult will it be to find a replacement? Gleason: It’s not going to be easy. He left a legacy here of a terrific staff of people who have picked up the ball and are carrying on. The organization is at the point now, with such momentum, that it’s going to be a lot easier for the next guy than it was for him. CW: Any internal candidates being considered? Gleason: There have been a few current employees who have thrown their name in the hat. And there also are a couple of people on the board who’ve done the same. I am not one of them. CW: Who’s on your wish list? Gleason: Oh, golly. Don’t ask me that.