Know which rules to break, with MTV co-founder Tom Freston

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2:01This guy said, we're looking for people who have absolutely no experience in television. Which I was like, wow. I said, they didn't even have television where I've been living. I mean, I'm walking around in flip-flops and pajamas for eight years. It was hard to believe now, but MTV was really revolutionary at the time. It was a sign of some kind of future that might be coming. This is Masters of Scale. I'm Jeff Berman, your host. This week on the show, the word legend gets thrown around a lot. In this case, we have a legend who is actually legendary. Tom Preston. Tom is a co-founder of MTV, former CEO of IACOM, and his new memoir, Unplugged, is full of wild stories and deeply meaningful lessons from his life as an unconventional CEO.

2:51This is going to be a fun one.

2:56Tom, welcome to Masters of Scale. Nice to be here. Great to have you here. I was in an airport with a book that I wasn't really loving, so I popped into the airport bookstore. I saw your book. I figured I'll grab that. I'll start it on the plane. Fortunately, there was no Wi-Fi on the plane. By the time I landed on a cross-country flight, I'd nearly finished it. It is a rollicking read. And one of the things that stood out for me in reading the book was the extent to which the early part of your career was shaped by breaking rules, making new rules. And as we look at what's happening in the world today, I'm curious what your take is on what the line is between what is acceptable rule breaking and what is really reckless and dangerous rule breaking.

3:44First of all, I'm excited to hear that they were selling my book in a bookstore in the airport, and I'm glad you liked it. Well, in terms of breaking rules, well, you don't want to break rules that are against the law, generally. You know, a lot of the rules that we broke, say, with MTV, they were more in the cultural realm. And we broke rules on a business basis. Like we, at one point, couldn't get the cable operators who were at that point in time in the early 80s, it seems like ancient history, but they were local monopolists. We decided after a couple of years, and we only had a couple of million subscribers, we would just go over their heads.

4:24It was like, screw them. And we cranked up the I want my MTV campaign, which to try and pull, you know, demand right through these distributors who were largely Elvis fans, who didn't like MTV, who didn't like the idea of paying us 10 cents a month. We were just somebody who cut into their profit margins. So that was a rule broken, which was like it was sort of not a polite thing to do in the cable business back then. Well, and beyond that, let's go back to Hindu Kush, which, I mean, I think most people know you for MTV, such an iconic stretch of your career. But you started by building an apparel brand out of India, right?

5:04And Afghanistan. Yeah, there were not a lot of rules. I wanted to live there. I had been traveling and I had developed this fascination with that part of the world. I figured, how can I afford to live here? I need to start a business because I couldn't get a job. So I started this business in the garment business, knowing nothing, never wanting to be in the garment business, but it took off like a rocket. And it was highly enjoyable for a bunch of years. And then at the end, there was an embargo that Jimmy Carter put down that ultimately put my company out of business. No more imports from India.

5:38And I sent three tons of clothes to Montreal and we smuggled them over the St. Lawrence Seaway, which was insane. I don't know what I was thinking, but I was kind of just looking for a little justice. You had a business that was growing. You were living the entrepreneur's dream and really, and the stories are so colorful and so vivid. And then all of a sudden, you've got a change in geopolitics. You've got a rise in tariffs. This sounds very familiar. Yes. And we're paying attention to the news today. I really feel for all these young importers these days who are screwed. What did you learn from then that would be useful for those entrepreneurs today who are dealing with the similar turmoil?

6:20I've learned humility. living in that part of the world you learn humility and you also build up a great confidence in yourself and your ability to do things you know as i always say it was like a sort of a bebop business lifestyle you could you would improvise you would take chances you would take risks you would bet on unusual people you would learn how to tolerate unusual people all of this kind of came in place and it made sort of a perfect resume for someone who was going to lead what became a cutting edge eccentric media company. I feel like there are so many ambitious 20-somethings who are terrified of stepping off of the well-worn path.

7:00They're kind of going through a machine of, well, it's the right college and maybe it's the right grad school or the job at the right company. And there's real fear about following something that's more of a passion or that they feel in their body. It just might be something worth trying and being a little bit more beboppy about their career. When you're talking with young people who are in that mindset, how are you helping them understand that there's another path? It's a tougher time for kids. You know, you're in your 20s these days, you want to start a career, and the office culture thing has sort of collapsed, and a lot of things that maybe we knew when we were that age are sort of gone.

7:37But, you know, step off the conveyor belt and embrace some uncertainty. No one's going to miss you if you're gone for a while. You can maybe travel all around the world like I did. But I would say that travel, making that part of your post-college experiences is like the world's greatest classroom. You learn a lot about empathy. You learn a lot about your country. You learn a lot about yourself. And when you come back, you're probably going to be more attractive to someone who's a recruiter than someone who just went on the conveyor belt the whole time. Relax, for God's sake. When you came back, you ultimately answered an ad that wanted people to work at a fledgling TV network who had no TV experience.

8:22I had come back. I had built this business. It was a multimillion dollar business. It was a big success, which I never expected. And I loved it. It crashed and burned. I'm deep and dead. I'm back in New York. All my friends. I'm now 33. All my friends have gone out and they got married. They have careers. And I said, what the hell am I going to do? I bought this book, What Color Is Your Parachute? The only self-help book I've ever bought. I've recommended it to so many people. I mean, it said that you have transferable skills. You can do a lot of different things. And by the way, you should do something that you love.

8:53And what do you love? So they had all these little exercises where you could evaluate your skills, look at what you like. And I came up with like music. I mean, I was a music nut. So I saw this article in Billboard magazine by this guy, John Lackey, was interviewed, and he was talking about this was the start of cable TV. They had started the movie channel and Nickelodeon, and they had plans to start a video music channel. I said, oh, God, that's a great idea. How do I get to meet this guy? So my brother, who was in the record business, knew a guy who had just gotten to work there. I got an interview.

9:26And when I went in, this guy said, we're looking for people who have absolutely no experience in television, which I was like, wow. I said, they didn't even have television where I've been living. I mean, I'm walking around in flip-flops and pajamas for eight years. So everyone they hired had no experience. A lot of people came out of radio, came out of the music business. In Nickelodeon, they were schoolteachers. And that turned out to be like the brightest move because we had to think of totally new ways to do things. And there's nothing like having no money to force people to innovate. And if you're working with a group of people who are on a crusade like you are, really passionate about something, you'll figure some good things out.

10:07It was hard to believe now, but MTV was really revolutionary at the time. It was a sign of some kind of future that might be coming, this TV revolution. Well, it's such an interesting challenge, Tom, because you're launching a television network in a world where there are rules and there are norms, right? How did MTV thread the needle of taking the experience and expertise of people who knew how the system worked, but the insurgent challenger mindset of the outsiders who came in with the real passion for music and for the artists and the, you know, screw the rules. Let's not do illegal stuff necessarily, but let's do things really differently.

10:45It feels like that's a bit of a clash between mindset and culture. How did you guys navigate that? Well, we had to learn what the business was. You know, ultimately, the business of cable programming wasn't that complicated. You got to have to create 168 hours of programming a week. You're going to bounce it off a satellite that's 25 ,000 miles in the sky, which seemed to me like, wow, this is like outer space stuff. This is the future, which gave you the ultimate scale of, you know, you put together this thing and then it's, you know, it has a footprint all over the United States. We hired people who knew how to do video, and we would reach out, say, to NASA.

11:26We would grab a lot of footage that was available in the public domain and utilize that, like the rocket ship launches. And we got this product from the program staple at the beginning were these music videos, which already had been produced. So we were sort of like a radio station. Everybody was in their 20s but me. I was the oldest guy at 33. My boss, Bob Pittman, who's a credible character, he was like 26. He never went to college. You know, very successful guy. I learned a lot from him. He was like a mentor to me. What's a great lesson you learned from Bob? The key of the business is the consumer.

12:03You have to deal with a lot of different groups, advertisers, in our case, cable operators, artists, record companies, this and that. But if you could make a connection with the consumer and know what's going on inside that consumer's head and maybe build up a research enterprise that gives you a lot of insights into what's going on and get that bond and build up some loyalty, that will allow the other things that have to happen in your business, getting distribution, getting advertisers, convincing people to do things, that will allow them to fall into place. So it's consumer first, second, and third.

12:42Outside of a couple of years at the NFL, I have spent the entirety of my career working for effectively challenger brands, insurgent brands. You were in my space for a while. I was, and I'm very keen to talk to you about that. But one of the challenges when you're scaling an organization that is a challenger brand and has that insurgent mindset is how you keep that culture while you grow. It's really not hard when you're five or 10 or even 20 or 30 people. You get to 100, 200, 300, and you start to have things literally called divisions, right? You're separating the company. How were you all able to maintain the culture at MTV through that scaling journey?

13:23That was a huge challenge, particularly because we wanted to stay sort of on this cutting edge. So I always thought that having a creative, innovative corporate culture, I won't say to use the word corporate, would be a big competitive advantage. We needed to be diverse, which was not something that happened right out of the box. I mean, we started as a lot of like white guys. You know, diversity actually came our way and it was more challenging than I thought it would be. But we were able to pull that off. And you want a place where people think their opinions get heard, that politics aren't really important, an organization is sort of flat.

14:02I would always go out and speak to them and try and reinforce the company values. And, you know, we're a creative organization. It's okay to take risks. We encourage you to take risks. We tolerate that. We want people to be collegial. And I wanted to have a fun vibe, you know. So we always had parties and get-togethers and socially. A lot of these things don't happen anymore. I've watched sort of the disappearance of office culture in general. It's not that great with the pandemic. I mean, people lose opportunities to bump into each other, learn things via osmosis, mentorship kind of has disappeared in a way so i think it's sort of coming back but i don't know if it's ever going to be like it was with people working remotely in their underwear like from some distant location they should be working in the office in their underwear that was the mtv way we we had the worst dress group of people we probably did have people in their underwear we didn't have a dress code that was only no frontal nudity was our rule and at that point time, everybody had a dress code.

15:03But I said, yeah, screw that. We're going to be an untraditional company. And I wanted the people in the company to look like the people I just saw in a subway car. The other thing is we wouldn't tolerate bad actors. If someone hires somebody who's substandard and they don't work out, that person is likely to hire other people who are along the same lines. So you're gradually eroding your company's vibe from the inside. Yeah. B players hire C players and A players hire A players. And it's a pretty firm rule. By the way, I never really focused on money when I would address the company at large.

15:42I would always talk about our sort of our creative risks and so forth and leave the money stuff aside. Well, that was one thing when you were leading and helping lead MTV. It's another thing when you're leading and helping lead Viacom itself. What was different for you going from overseeing one brand to a family of brands that have wildly different cultures? Well, we had a family of brands in the sense we became a big cable networking operation. We had Nickelodeon. We had Comedy Central. We had VH1. We had Noggin. We had Nick Jr. We had TV Land. There's a country music television. So when I ascended to be the CEO, I became the president of Viacom along with Les Moonves.

16:25We were like a big entertainment conglomerate. And I became co-president with Les. We got along well. He had his fiefdom. I had my fiefdom. But then the digital revolution began to hit and break up this ecosystem. We survived on the fact that we had the central operation. We were like editors. We could manage because of scarcity. We didn't have to put out a lot of things. And now all of a sudden, we've got the internet.

16:56Still ahead, Tom Freston on what it takes to break through today's fragmented media landscape.

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17:48How do we build a future that is human-centered? I'm Rana El-Khoyoubi, and on my podcast, Pioneers of AI, we answer that question and so many more. As an AI scientist, entrepreneur, and investor, I know what it takes to build AI that works for everyone. Every week, I sit down with the pioneers shaping our future, and we take you behind the scenes of the AI that's transforming our lives. Find Pioneers of AI wherever you tune in. Hey, listeners, Bob here. If you listen to Rapid Response on Masters of Scale, you may be missing half the show, because every Friday we release a second Rapid Response exclusively in the Rapid Response feed.

18:36The guests and topics are just as compelling and timely, from Ford's CEO to NASA's administrator to the lessons from the Devil Wears Prada. It takes about 10 seconds to find. Just search Rapid Response wherever you listen to podcasts and hit follow to make sure you never miss an episode. I hope to see you there. Welcome back to Masters of Scale. you can find this conversation and more on our YouTube channel and check out the link in the show notes to subscribe to our newsletter. Viacom did not really make that digital leap. It struggled to. So given that talent that was there, what stopped you from getting there on the digital side?

19:20Yeah, well, it's back to the innovator's dilemma. I'll just take it in the case of MTV. It wasn't like we didn't see what was coming. I mean, you have to be an idiot not to see that. And we were the canary in the coal mine. I mean, because it was kids, teens, young adults, they were the first people to really dive into the internet and begin, you know, moving some of their viewing time and attention over there. Now, you know, people can upload stuff, share stuff, comment on stuff. Everybody's almost their own little broadcaster. How do we get in on this business? We don't really have the DNA to do it.

19:54So all of a sudden now we're probably going to have to buy something. We're going to have to buy something and, you know, try and integrate that into our business. We bought a bunch of small websites that were of no great consequence, but then, you know, met with Mark Zuckerberg. I'll never forget that. Someone called me up and they said, you know, we want you to meet this guy, Mark Zuckerberg. He's like 20 years old. He started this thing called The Facebook. Their revenue's$9 million. So Mark Zuckerberg came in and, And, you know, we had seen Friendster, been watching MySpace. We saw social media.

20:27This is interesting. He came in in flip-flops and a hoodie in February in Times Square. I remember that. There were offices. And they were debating whether to add high school students to the platform. We offered to buy Facebook for a billion and a half dollars, which was a lot for us. Well, especially with nine million in revenue. Yeah, it was a lot for us. And half of that would be an earn out. Mark Zuckerberg wanted nothing to do with it. he did not want his MTV. And now he's like, he's done okay. He's done all right for himself, that young fellow. So then we looked at YouTube. YouTube was really like a, wow, we were the king of short form video and here they are doing this, but it was a whole different model where anybody could upload video.

21:13Anybody could comment on it and share on it. And we said, this is fantastic. So the problem was because we were a big public company, we were liable. They were people uploading, you know, episodes of our shows or Saturday Night Live, whatever. There'd be a lot of copyright stuff. And the board at Viacom viewed it sort of as a copyright infringement machine. They ultimately, after I left, sued YouTube famously trying to fight the future. And no one ever could have imagined the ecosystem that YouTube was ultimately able to put together. I think it's worth almost$600 billion today. And it's a monster.

21:51We cast our eyes on you at MySpace. So let's see what's going on over there in Santa Monica. There's an alternate universe where you would have been my boss, Tom. You know, you opened the book with the MySpace story and it sort of being the catalyst for leaving Viacom. Not long after you left, Oprah reached out and asked you to help her build her company. What's a lesson you learned from working with Oprah that you haven't shared with the world before? She's the easiest person in the world to talk to, to be with, and she just radiates goodwill and goodness. And we all know that. We all know Oprah.

22:26So working with her was a pleasure. Oprah had a cadre of largely women who had surrounded her and worked on her syndicated show, which was this huge business. And they knew Oprah and they knew what they wanted. And they kind of came as outsiders to Hollywood. I helped mostly in the business side. Like, can we get a deal with Comcast for distribution? How do we set up some of these departments? I would work on that kind of level. So I did that for a couple of years. Does what's happening with the consolidation of media and ironically, then also the fragmentation of media also create lanes for innovation?

23:01Yeah. Is it exciting? I guess I mean, I look at, I'm always attracted to stuff around the edges, sort of out of the mainstream. So I look at like, yeah, the movie business and television, but I don't look at 824. They're independent. They're not owned by one of these public companies, and they've opened up a live venue space. They sell merchandise. They have great instincts and great tastes, and they continually seem to pick up and pick projects that are low cost and seem to do really well at the box office. And they're doing television, and they're experimenting with shorter-form programming that could go on the internet.

23:34I said, well, they're putting together a whole new model. And I thought one of the most interesting is the idea that they have a live entertainment venue where they can also test and, you know, sort of pilot things existing outside of the mainstream with credibility now. So I think some of these little folks are the people to keep your eye on. Some of these people that might jump off YouTube. The YouTube economy is remarkable. I mean, one of the most remarkable things about YouTube is YouTube TV as an app. That's like everything we ever wanted. I mean, some of this is if you're trying to build something like this, whether it's media or in other categories, what I'm taking from what you're saying is have a point of view.

24:14Have a point of view and then also build relationships with key creative actors and talent. At the center of this, all this change, everything is talent. And there's a lot of people today in the YouTube universe, in the TikTok universe that you might be able to tap into who have been able to establish pretty amazing businesses. Speaking of relationships with talent, you've built some pretty incredible ones. What's the secret to building and maintaining relationships with creative talent? we have to be honest you have to be someone that they respect and they need to think that you know what you're doing john stewart is a perfect example we had this guy craig kilbourne on the daily show he was sort of a middle of the road kind of a fraternity house guy nice guy but we gave to john stewart the shot and he said i want to do political satire we thought something more in a pop culture vein but we let john do it and you know he invented fake news and he turned it turned into this steamroller full of Emmys and he's hosting the Oscars and he hires Samantha B and he hires John Oliver and this whole galaxy of people.

25:20You said that it was harder to diversify MTV than you thought it would be. Why was it harder and what ultimately worked for you? It was harder because I thought, you know, at one point MTV had received a lot of criticism for not airing a black axe, which, you know, fair enough in many ways. We kind of came around. We kind of made up for that. We were the first people to kind of give hip-hop, put it in the living rooms of America. I mean, BET or in radio wasn't even playing hip-hop. But we were uncomfortably white. We were uncomfortably male and tried to change that. There's a great business case for diversity.