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The Birth of BET

4/10/2005 8:00 PM Eastern

The initial impetus that helped turn Black Entertainment Television from an idea into reality came during a 20-minute conversation in 1979. At the time, Robert Johnson was working as a lobbyist at the National Cable Television Association. After an NCTA board meeting, he approached one of the most powerful men in the business, John Malone, who ran MSO Tele-Communications Inc.

Johnson “asked me what I thought about the idea of a channel targeting the black audience,” recalls Malone, who is now chairman of Liberty Media. “I told him that it was a terrific idea and asked him how we [at TCI] could help. That was really the start of it.”

By that time, Johnson had already traveled a long way. Born into a poor Mississippi family, he excelled in school and was the first of his siblings to attend college. After getting an undergraduate degree at University of Illinois and a masters in international affairs from the Woodrow Wilson School of Public and International Affairs at Princeton University, Johnson moved to Washington, D.C., where he worked for the Corporation for Public Broadcasting, the Urban League and then as the press secretary for Congressman Walter Fauntroy.

In 1976, Johnson started down a very different career path. After a chance meeting with an NCTA employee at a party, he landed a job as vice president of government relations with the association.

“I didn't have any background in business,” Johnson says. “What really attracted me to the cable industry was that it was such an entrepreneurial industry, a growth industry with lots of very dynamic people.”

That entrepreneurial spirit quickly fueled his dreams. “I knew you couldn't start a black channel over broadcast TV, because it was a mass-appeal medium,” Johnson says. “But once you had the technological marriage of cable and satellite, the idea of creating a channel targeting African-Americans made sense.”

So much sense that it took only 35 minutes to talk Malone into having TCI provide Johnson with a $320,000 loan and invest $180,000 for a 20% stake in the fledgling network.

Other operators who were battling to get franchises in urban areas were enthusiastic. By the time BET launched as a weekly two-hour programming block on Jan. 25, 1980, Johnson had lined up distribution on about 350 operators serving some 3.8 million subscribers.

Johnson quickly moved to expand the company's programming. By 1983, it had a 24-hour schedule. “Bob was really the first niche programmer,” Malone says. “He was the first one to identify a clear, targeted audience. He understood that the cable industry would increase their market penetration by building a portfolio of niche channels.”

But being a pioneer wasn't easy. Many operators were reluctant to pay carriage fees for a network targeting African-Americans, and advertising targeting blacks was virtually non-existent.

Limited revenues forced BET to rely on music videos and other lower-cost programming, a decision that has drawn some criticism over the years.

Malone dismisses those complaints. “Bob is a very solid, disciplined businessman,” he says. “He realized that you have to control your expenses and losses so that you don't scare off your investors. He had to operate on a shoe string but he stuck with his idea [of building a network for African-Americans]. He never paid a dividend or high salaries and reinvested everything back into the company. Every year, it got bigger and bigger.”

By carefully controlling costs, BET moved into the black in 1986 and began to have an impact far beyond its size. During a period when MTV: Music Television and other cable services were playing little black music, exposure on BET helped establish hip hop and a number of black artists.

In 1991, BET went public, becoming the first African-American owned company to be listed on the New York Stock Exchange.

In the late 1980s and 1990s, Johnson pushed aggressively into other businesses, investing in restaurants, magazines, the Internet and other sectors. Some of these enterprises, such as a BET-branded airline, never got off the ground. Others, like the magazine division, never made money and were shuttered.

Meanwhile, Johnson and Malone chafed at the stock's sluggish performance, and in 1998 they bought out other shareholders, taking BET private again.

The decision to sell BET for $3 billion to Viacom Inc. in 2000 came at a point when media firms were commanding very high multiples, Malone says. “But it was really Bob's decision. I'd gone through that same debate with [former Time Warner Inc. chairman] Ted Turner about staying independent and accepting an offer to sell, It's always a tough call. You've built up your own independent business. But it can get a little scary when everyone is consolidating and has market power and you don't, especially when you see how some of these companies are using their muscle.”

Johnson says the sale has allowed BET to “unlock shareholder value,” and to keep BET's management independent, providing it with the resources it needs for future growth.

BET's distribution, for example, has grown from 59.1 million homes in March 2000 to 80 million in March 2005. Meanwhile, the network's audience for total day has grown from 295,000 viewers (248,000 households) in 2000 to 440,000 viewers (369,000 households) between Jan. 1 and March 15, 2005.

Johnson is nearing the end of the five-year contract he signed when BET was sold to Viacom. He has opted to leave at the end of this year to concentrate on several investments, including hotels, restaurants, gaming companies, a jazz label and a regional sports network.

Johnson says he's proudest of having established the network “as an iconic brand that it has penetrated the mindset of society,” and of proving that you can create a very valuable business in serving the African-American marketplace. “Hopefully, those two facts will stimulate others to look at this market and African-American management in a positive way.”

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