Betting On Success
Robert (Bob) L. Johnson, founder, chairman, CEO and owner of BET Holdings Inc., likes to quote a line from singer Ella Fitzgerald: "I've been rich and I've been poor, and rich is better." Johnson grew up as the ninth child of 10 in a struggling Freeport, Illinois, family; today, he lives on his own 133-acre horse farm in Virginia.
After graduating with a master's degree in international affairs from Princeton University in 1972, Johnson worked for the Corporation for Public Broadcasting and the Urban League before becoming vice president of the National Cable TV Association. It was in that capacity he got to know John Malone, the legendary head of Tele-Communications Inc. (TCI), the nation's largest cable TV provider.
During this same period, Johnson realized no cable TV company provided programming specifically targeting African Americans. After developing a plan for a new channel, he shared it with Malone. In 1979, at age 33, Johnson received $500,000 (in both debt and equity) from Malone to launch the first TV channel with programming especially for African Americans.
One year later, Black Entertainment Television (BET) began airing for two hours late on Friday and Saturday nights, reaching 2 million U.S. households. Fast-forward 20 years, and BET now appears 24 hours a day in some 67 million U.S. homes, including 99 percent of the 6.8 million African-American households with cable.
BET Holdings Inc., based in Washington, DC, is now a billion-dollar empire whose holdings comprise an exhaustive list: two movie channels; an internationally distributed jazz channel; BET Weekend, a weekend newspaper insert with the third-largest circulation rate among African-American publications; Emerge, a news magazine; Heart and Soul, a magazine devoted to health, beauty and fitness; a financial services arm; a clothing line; a publisher of black-oriented romance novels; the first two of a planned chain of music-themed restaurants; a dance club at Disney World Resort; and an Internet programming venture with Microsoft (MSBET). Next up: a Las Vegas restaurant in partnership with Hilton Hotels, as well as plans for producing a new late night TV talk show, 10 TV movies later this year and three theatrical films planned for next year.
In short, Bob Johnson is a busy man--but not too busy to talk with his fellow entrepreneurs. In the following interview, he shares his enthusiasm for business, the secrets to his success, and his thoughts on the consumer potential of African Americans--who he feels are being neglected in many markets.
Scott S. Smith: You started very small. What gave you the confidence to think you could grow BET into a huge enterprise?
Robert L. Johnson: Ask any entrepreneur about his rock, and he'll tell you he has a mountain. You have to have faith in what you're doing. I knew blacks watched more TV than any other group but didn't have programming that appealed to them, and that advertisers wanted to reach this audience. The same principle of combining research with an entrepreneurial gut applies to any new business. You go after something with the conviction that there's nothing more important than making it happen.
Smith: You'd never run a company, yet John Malone gave you half a million dollars. How did that happen?
Johnson: He looked at my proposal, and in 45 minutes, we cut the deal and he wrote a check. He's the kind of guy who believes an entrepreneur will work harder for himself than as an employee, and he leaves you alone to do your best--although he's always a phone call away.
His only advice was "Get the revenues up and keep the costs down." Some people think I've tried to do business on the cheap, but too many businesses run into trouble because they don't keep costs in line with revenue. We waited to launch our film production arm until we had the critical masses needed to do something this ambitious.
Smtih: You also had the advantage of a carefully targeted niche.
Johnson: Once you have a vision of your market, you can think of many ways to build your brand by diversifying around that core appeal.
Smith: How do you keep your finger on the pulse of your target market?
Johnson: Some 90 percent of BET's 572-plus employees are black, many of them young trendsetters, and they keep us in touch with the audience. Black consumers want to talk to people in business who understand their desires and needs. You can't put your own cultural stereotypes on customers. You can't assume the guy who comes into your jewelry store in jeans and a T-shirt only has $5 in his pocket--he might be me, and I could buy your store many times over. If you don't hire qualified minorities, you're missing out on the fact that the customer base is changing.
Smith: How do you see the African-American market evolving?
Johnson: Blacks number around 35 million, and their income is rising fast. African Americans spend money--they save less than whites--and are brand loyal. There will be a significant opportunity as they become more affluent, buy more homes and so forth.
Expanding your market to include more minorities isn't a social program; it's simply damn good business! Minorities want to be treated with the same respect as everyone else. They want value and service, not to be taken advantage of because a business doesn't have much competition in an area.
Smith: What about African-American vendors? Are they getting a fair share of the economic boom?
Johnson: African Americans make up 12 percent of the population, and yet black firms that supply products and services [to other businesses] are getting very little business. It's disgraceful. Big or small, companies are making little or no effort to seek out qualified vendors and professionals in the minority community, whether we're talking about attorneys, accounting firms, janitorial services, parts suppliers, whatever. I'm not talking about hiring incompetents [simply because of race]--I've fired minority vendors who weren't performing.
Business owners should understand how the economy works. If you give a little of your business to minority suppliers, then they'll circulate it in their community, pay taxes, create jobs, provide a stable community. Ultimately, there would be fewer people on welfare, crime would come down, everyone would participate in the economy, and the market would become bigger. If black-owned firms got just 5 percent of the supply business, it would have an enormous ripple effect.
Smith: You seem to be betting BET on the notion that black and white cultures will remain distinct.
Johnson: We're moving toward more market fragmentation, so markets can become sustainable with smaller and smaller numbers, customized down to even one person. It isn't just about ethnic markets but attitudes and behavior. You can combine strong brand identification with niche marketing if you're nimble. At the same time, we can unite around core values like freedom, individual rights, democracy, property rights and privacy.
Smith: What do you say to business owners who can't find the time to be politically active?
Johnson: In a capitalist society and representative democracy, business is affected by politics. If you don't think so, you're living in a dream world. You need to have a voice, or your business could suffer. Business owners have to make government serve their interests, or it'll serve the bureaucrats.
Smith: Does business also have a social responsibility?
Johnson: You live in society and expect it to work. You can't say you don't care about schools or pollution. That doesn't mean you have to be politically correct, and I object to flavor-of-the-month crusades. At BET, we take the position that there's no distinction between hard liquor and beer except the strength of their industry lobbies, so we run liquor ads. We don't make a lot of money on them, but it's a matter of taking a stand on the first amendment.
Smith: In 1991, BET became the first company with an African-American majority ownership to get onto the New York Stock Exchange; then in 1998, you and Liberty Media (a TCI subsidiary) made it private again. Any thoughts on the advantages or disadvantages either way?
Johnson: There isn't really that much difference because either way, the investment isn't totally your own. Whether someone is a shareholder or your uncle, he or she still wants to know how fast their money will grow or when they can take some of it out. When you're public, you may change shareholders when some are upset, while when you're private, you just get angry relatives.
Smith: How do you attract high-quality employees, and can smaller companies use the same strategy?
Johnson: [Whether you're a large business or small one,] you have to get others to buy into your vision and its potential, and infect them with the desire to succeed. You then have to balance being a taskmaster and a friend, and, at the right time, make them part of the decision-making and risk-taking processes and let them share in the rewards.
Smith: How do you encourage sound risk-taking by employees?
Johnson: If a decision is made intelligently and you don't get the result you want, you try approaching it another way. You have to give employees the feeling that anything goes, as long as it's put through the rigors of business discipline. There can't be any kind of punishment, making someone feel isolated or not a team player. Create an environment where creativity is rewarded, where there are no bad ideas. Nothing is so outside the box that it's crazy.
Smith: What types of employees or businesses do you have difficulty working with?
Johnson: Those who don't do their best. If you have C-level potential and give it your all, that's better than an A-potential person who just tries to get by. If someone I do business with is having problems with cash flow or product control, for example, I want that person to come to me and explain what's going on, and we'll work it out. I'll stay loyal, if the desire to improve is there.
Smith: Finally, where do you get the time and energy to do everything?
Johnson: I've got a terrific COO who allows me to do the strategic blue-sky stuff. Once you get the company to the point where you need someone else to take over some of the responsibilities, don't let the desire to control everything get in the way of doing what you're best at. It's hard for entrepreneurs to give up the ego and let go, even for their own good.
Scott S. Smith writes about business issues for a variety of publications, including Investor's Business Daily.