Update 7/8/2019: Since this was first posted on 6/5/2013, two related things have happened. One is that Telemundo has finally become competitive with Univision, and appears to be on its way to become the #1 rated Spanish-language tv network, thanks to its ownership by NBC and the huge investment necessary to produce very competitive domestic programs and news. A recent NYT article documents that here.
The other one is that it came to my attention that a book was recently published (“Straight Out of Barrio Hollywood: The Adventures of Telemundo Co-founder Frank Cruz”). That title immediately caught my eye, as Frank Cruz was neither a co-founder of KVEA nor Telemundo. We hired him at KVEA to be our VP of Community Affairs. His chapters 7&8 on the founding of KVEA and Telemundo are almost total fabrications, and he essentially inserts himself into my role in the first chapter. So I responded with a strong letter and an accurate history of how these two entities came to be founded. If you’re really interested, you can find them both here. But the following article covers the subject fairly well.
Introduction: this is about my 1986 300E and how I came to have it. It’s a long story, and has a lot of non-car related content, having to do with my career in television and the birth of KVEA and Telemundo, in considerable detail. That part is obviously somewhat off-topic here, hence the disclaimer. But I’ve been needing to put this story to words for some time. The Mercedes W124 pictures shown are of various vintages and sources. There is an accompanying CC on the W124 here
Life is about chasing dreams, and hopefully we’ll all catch one or two; perhaps the car or woman of our dreams, or a big financial home run. But often there’s a price to be paid; perhaps the dream turns ugly, or turns out not to be your dream after all. When I was five, my dream was to be a king. Right now one of my dreams is to be stretched out naked on the banks of a remote Cascade Mountains lake in the sun. There’s an arc in those dreams, from the unattainable to the prosaic.
My dream cars have taken a somewhat similar trajectory: when I was six, I wanted a Mercedes 300SL Gullwing. I still want one, but realistically I’m happy enough to have a reliable shitbox to get me down twenty miles of isolated gravel forest roads to that lake trail head (and back). But exactly halfway between six and sixty, the arc of my dreams intersected with a set of circumstances that made my dream car of the time a reality, as well as a promising business start-up. I consider myself very lucky for that, even if they didn’t exactly end so dreamily.
In retrospect, it seems rather obvious that my car of a lifetime would be a Mercedes. Aren’t we all most influenced by our early automotive exposure? As a child growing up in Austria in the fifties, a Mercedes certainly was the dream car; it was god on wheels, and when a new model came out, like the W111 “Flossen” in 1959, it was the talk of the town. Of course, Mercedes were mostly out of reach except for the very few–or the price of a taxi fare.
Well, my father’s med school buddy joined the ranks of the most exalted few, by marrying the daughter of the owner of Mahle Pistons. This is what she gave him for a little wedding present: a 300 SL Gullwing. And when he came to visit us in Innsbruck in it, he might as well have been a king in my eyes. That fact that he raced it in rallies made him a candidate to be emperor. I think I switched my dream shortly after clambering over its high sill to sit behind its giant steering wheel. How about king of the road?
But the grass is always greener on the other side of the Atlantic. When I had a close encounter with a 1959 Cadillac on the streets of Innsbruck, the dream expanded to encompass celestial aliens, not mere earthly kings or a German Mercedes. Soon afterwards, we moved to the land of unlimited fins and possibilities, and all-too quickly, Cadillacs didn’t seem quite so other-worldly anymore; even my fourth grade teacher drove one. And within a couple few years of immersing myself in Detroit’s Wonder Bread, I started to feel like just maybe there were perhaps a few empty calories in the American automotive diet.
Our neighbors in Iowa City bought a new black 1962 Mercedes 22oSE. My Dad bought a new black 1962 Fairlane. Despite certain outward similarities, the differences were all-too obvious. It was an inevitable comparison, but an unfair one; I was quite aware of that at the time. The Fairlane cost half as much as the Mercedes.
But that didn’t stop me from sitting on the leather seat behind the big white wheel of the Benz for hours on end, soaking in its superb dash and interior fittings. And relishing getting to ride in it, listening to the melodic strains of its high-pitched six. Childhood impressions are lasting ones.
Some years later, my father’s cousin, who was a traveling salesman of fine German optics, ditched his ’65 Chrysler for a white 280SE. Unlike my Dad, he was a real car guy, and saw a kindred spirit in me. He took me for a long ride, one that deepened those impressions. I’d loved his big, rumbling Chrysler, and his ’62 Fleetwood before that; but bombing around Kansas City with the sunroof open, sitting on that leather throne of a seat made me feel like…a king. Nooobody else on the road that summer day in Kansas City was driving a Benz, never mind nearly as fast as he was. He made that little six sing soprano, like it was made to do.
Ironically, moving to Southern California in 1976 substantially dampened my Mercedes dreams. We lived just outside Beverly Hills, and the place was absolutely crawling with 450 SLs, as well as the big 450SEL W116 sedans. And who was driving these SLs? Middle aged (and older) women with blinding hair and Bozo-grade makeup, trolling Rodeo Drive for a parking spot for a serious shopping session. Or their male counterparts, with comb-overs and Gucci loafers, heading for a poolside meeting at the Beverly Hills Hotel. To this day I have a deep-seated aversion to the R107 SLs, despite all of their admirable qualities.
Mercedes Mania quickly swept down from the Hills of Beverly across all of Southern California. Any Yuppie worth his Ralph Lauren button down or polo shirt bet his career prospects on a new 240D, even if it only had 65 clattering horsepower under the vibrating hood. It was the cheapest way to join the ranks of the true Benz Believers.
I’ll never forget my Sales Manager at KSCI taking two clients and me to lunch at the new Mountain Gate Country Club way up above Mulholland Pass, near where the new Getty Museum now is, in his yellow 240D automatic. With the A/C on, I literally wondered whether it was going make it up. It reminded me all-too much of riding in VW Sambas up alpine passes, counting the cobblestones and blades of grass as they went by. And you traded a ’77 Olds 88 on this? For how much?
I had (and still have) great respect for these clattering and throbbing diesels, but as taxi cabs, or in the hands of those that just have a powerful affinity to them. Or want a semi-permanent car that can be kept going almost forever. Or run veggie oil in it. Yes, I get that; but not status-seeking.
Back in Germany and Austria, diesels were almost exclusively driven as taxis. Now this was before the great diesel boom in Europe, which was just about to take off, and coincided with lower taxes/prices for diesel and a new generation of direct-injection turbo diesels that propelled it along.
But Mercedes was selling almost only diesels in the US, because of EPA emissions and CAFE regs. And Los Angelenos were lapping them up. The clatter of a Mercedes diesel at a stop light itself became a status symbol. I still loved the idea of Mercedes, as well as every one of their over-engineered parts, but the reality of what was available in the US then, their performance, and what they cost; well, that was another matter.
But when the aerodynamic and turbo-charged W126 300SD arrived in 1980, it did tug on me with its 105 mph capability as well as excellent fuel economy, even though it still clattered when cold. Although it was way out of my means then, the W126 pointed to a new direction for Mercedes: sleeker, lighter, more aerodynamic, and with more America-friendly amenities. It sold like tacos in SoCal.
In 1983, my job running KSCI for the TM organization was at the point where I felt I could finally fulfill one dream, if not the ultimate automotive dream: my first new car, paid for by the company. Although no one was really looking over my shoulder, even the $16k for a new Thunderbird Turbo-Coupe seemed none too cheap, at least for the times. It was as close as I could get to my real dream car, which didn’t yet exist except on the drawing boards.
In December of 1982, on a business trip to Germany to see boss Maharishi, I first saw the brand new Audi 100, which would not come to the US until 1983. My aero-fever notched up a few more degrees. Is this it? Not quite.
My bigger dream was to buy KSCI, which was encouraged along by Maharishi, indicating he might well be interested in selling: show me the money…(his personal mantra). But every time I suggested a price point (based on then-typical 10x cash flow), he would double it! This happened several times, going ever higher, always with his asking price being utterly unrealistic in terms of ever hoping to finance it. Plus, the reality of actually putting together the financing without any of my own money was daunting, given my age (30), relative lack of experience and connections.
By 1982-1983, KSCI had become a very profitable multi-ethnic tv station, with programming in over 15 languages, mostly Asian and Middle-Eastern. But we had under-utilized air time, so it seemed natural to also compete for the growing Spanish-language audience in LA. Up to that time, KMEX/Univision (then owned or controlled by the Mexican media giant Televisa) was the only game in town; nationwide, actually. So we started a block of Spanish-languge programming, but had to resort to a lot of original and local production, because Univision effectively had a stranglehold on Mexican programming. This was a critical point, and one that would affect the future of Telemundo to this day.
Since my background was in production, we opened our studio doors to new and young talent, and we started producing all kinds of local shows in our studio near Westwood: cooking, talk, comedy, music, and the first live MTV-type show in Spanish. It was a big contrast to the endless imported Mexican novelas (soap operas) on Univision. Not that we even dreamed of actually beating KMEX with our low-budget home-grown fare, but it was the only way to carve out a niche. And we did make some inroads, especially with younger viewers. There was a lot of Latino talent in LA just waiting to be released by giving them an opportunity, and many went on to have successful careers.
In late 1984, I was approached by Joseph Wallach, an American who had played a key role in creating what was then the world’s fourth largest tv network; TV Globo, in Brazil, a media powerhouse that utterly dominated there. He had recently retired from Globo, moved back to Beverly Hills, and also saw the unfulfilled potential for a second Spanish-language station in LA. And he claimed to like what we were doing at KSCI.
We both also shared the inevitable thoughts of a possible future second Spanish-language network, a dream that I had been mulling myself for some time. There were a couple of other independent Spanish-language stations popping up in a few key cities (Miami, NY, Texas) around then, so it seemed that the opportunity do do something about it was coming closer, but it would have to be anchored by a station in LA, as was Univision.
We combined forces and tried (again) to buy KSCI, but not surprisingly, Maharishi’s asking price was twice its market value. Then we heard that KBSC Channel 52 (originally a Kaiser Broadcasting station – see; there is a car tie-in here somewhere), with a much better signal from Mt. Wilson, had to be sold in a hurry by its near-bankrupt owner, Oak Industries. The asking price: $32 million. Joe and I wrote a letter to them, offering thirty million ($63 million adjusted) and they accepted, because it was all the had to stave off a bankruptcy judgment after the collapse of their ON TV over-the-air subscription service, now that LA was being cabled.
Joe obviously some had some money, but he didn’t want to put it in play. I had nothing: 32 years old with two young kids, a stay-at-home wife, and a recently-acquired mortgage. I didn’t know where to find $30 million (plus much more to cover start-up costs), but someone steered Joe to an outfit in New York, a new private equity offshoot of Reliance Group Holdings, headed by Saul Steinberg, once the terror of Wall Street, and the inventor of “greenmail“.
Steinberg started out with a computer leasing company during the go-go sixties, eventually leveraging it into other companies and eventually a large insurance company (Reliance), which he used as an anchor for many of his deals. During the mid eighties, he was at the apogee of his arc, worth almost a billion from his greenmail payoffs: management would pay him huge premiums to buy back his shares, a reward/bribe for him agreeing not to take over the companies he threatened to. The biggest of these was the Disney Company, which alone netted him a quick $60 million. And those take-over bids were financed by Michael Milkin’s famous (and ill-fated) Drexel-Lambert junk bond factory. Steinberg was famous for his obscenely-sized compensation packages, and essentially was the poster boy for so much that has followed ever since. A true pioneer!
Steinberg lived in Rockefeller’s former NYC palatial town house, collected Old Masters paintings, and had a private Boeing 727 . And his wife Gayfrid threw him the world’s first million-dollar birthday party for his 5oth. It was the roaring eighties, and Saul was doing some serious pioneering indeed. In what can only be called a gothic story-book ending, Steinberg’s empire eventually collapsed in spectacular fashion, and he died recently, not long after his mother sued him for an unpaid $6 million loan from her, presumably to keep the lights on. What a way to go.
I’d like to say something here about how much I loathed that pompous SOB, but one isn’t supposed to speak ill of the dead, right? But I find his pathetic ending somehow fitting, and rather uncommon in this day and age. It’s like something from an earlier era; most billionaires nowadays are smart enough to hang on to their money.
Back then, Steinberg’s greenmail antics (soon banned by stockholders who were of course getting screwed) and such was stuff I’d read about in the WSJ, and it all seemed rather remote. Now we were going to be owned by him. This wasn’t exactly what I had expected when I left KSCI, but I was given a small equity stake in the station. One dream partially fulfilled, I assumed.
Reliance had zero prior experience or knowledge of the US Hispanic media market. It was a stretch for them to get comfortable with the idea of in vesting in KVEA, and it was anything but a sure deal for a while. But after numerous presentations, in May of 1985, the deal with Steinberg’s new venture capital arm, Reliance Capital, headed up by Henry Silverman (who would go on to become another (in)famous financier for more reasons than one) came through, and I became the first employee of Estrella Communications (KVEA) , the predecessor of what would eventually become the Telemundo network.
The actual purchase went through sometime in late summer or September of 1985. Now my job was to hire a completely new staff of some 125 in a matter of a few weeks, and totally rebuild the tired old facilities of former KBSC into the new KVEA. It turned out to be a Herculean undertaking.
The building was a dreary, windowless industrial affair, the equipment was ancient, and we on were something of a budget, obviously. Fortunately, a number of my managers, friends and excellent co-workers from KSCI decided to jump ship and join me at KVEA, where they saw an exciting new opportunity, despite the immense challenge of launching a new station in such a short time. I don’t know if it would have come together without them. The energy of a start-up is infectious, and everyone worked at 100%.
On November 24, 1985, KVEA’s new Spanish language programming debuted, after weeks of long days (and nights).
If I look a bit bleary-eyed as we gathered to watch the launch, there was a reason: It had been a round-the clock marathon to meet that deadline.
That night Joe and I were holding hands, but the seeds of what lead to both of us leaving KVEA within less then two years were already planted. The original understanding was that I was to be General Manager, and fully responsible for operating the station, and that Joe would be “Chairman”, and hover behind the scenes. And that’s what Reliance bought into, including making me largely responsible for writing the business plan, detailed five year budgets and projections, and holding me accountable for the results…..well, you probably know where this is going.
Joe had many contacts in Latin America that provided us crucial programming. And he was energetic and anything but ready to retire behind the scenes, and he started making a lot of crucial decisions that were not in our business plan. I had some concerns about that, so I essentially handed over the GM title to him, (I became Station Manager), because I didn’t want to be held accountable for some of these critical decisions, while I struggled to keep it all together and actually running. And he was very expansive, a natural reflection his personality and experience running a huge network that utterly dominated tv in Brazil.
In comparison, my experience at KSCI made me more of a guerrilla fighter against the long-established KMEX 34 (Univision), especially since the Spanish tv market was drastically smaller back then in the early eighties than it is now. And I was very cognizant of the fact that Hispanics of Mexican descent were the overwhelming majority in LA,–as in the rest of the US–and that Univison had a lock on Mexican programming.
Realistically, there was no way KVEA (or Telemundo) could ever hope to beat Univison, and that has turned out to be the case ever since, despite the endlessly revolving door of new executives and programming ideas Telemundo has tried in the past 25 years to date. Telemundo is still firmly stuck in second place today, even with all of the resources of NBC. My business plan called for slow but steady growth, carving out a profitable second-place niche, and holding off doing expensive local news for a few years until the station was better established with viewers and advertisers, and the cash flow was positive.
Essentially, what I had proposed was to follow the example of so many English-language independent UHF tv stations that had cropped up in the US during the sixties through the eighties. They didn’t attempt to beat the big networks (ABC,CBS,NBC) then; they counter-programmed with re-runs, old movies, and such. And they didn’t jump into expensive local news, except for perhaps when the point came that they could actually monetize a newscast, perhaps in the bigger markets at some point. Being number two can be very profitable, done right.
But Joe’s expansive vision was different. Early on, Joe decided we had to have a competitive local newscast, a very major and expensive undertaking. And then a few months later it was news on the weekends too, and then…next thing we knew, we were running almost double our budgeted expenditures for the first full year (1986), and it was a huge strain on everyone to endlessly scramble and keep up.
Sure, it was exciting too; Joe had the ability to create great enthusiasm in the corps: we were going to take on the giant! It was also stressful, especially the part about me having to justify to Reliance why they had to dig up more money to feed the massive additional capital outlays and personnel costs. The seeds of discontent were sprouting.
A $500 per month car allowance was part of my five-year employment contract. Since I had to leave the Turbo Coupe behind with KSCI, I needed some wheels to get to work at KVEA. It might have been unseemly to lease a nice new car during this penny-pinching start-up period, so I found a long-term rental outfit that handed me the keys to a new Sentra (CC here). It made the “reverse commute” from our house in Beverlywood (West LA just south of Beverly Hills) via winding Coldwater Canyon and out to Burbank in eager and reasonably fun fashion, despite it being such a cheap little car.
For some obscure reason that I’ve long forgotten, the rental company later swapped me into a yellow Reliant K-car exactly like this one. Now that was a bad dream; compared to the relatively-sprightly and well-handling Sentra, the Reliant was duller than dishwater, and squealed through the tight downhill corners like a pig, just not a greased one. I missed my Turbo Coupe.
As the first full-time second Spanish-language station in LA, there was naturally a lot of interest from the viewers. KVEA had a decent beginning in terms of the ratings, although we weren’t really competitive; KMEX’s Mexican novelas in prime time were untouchable. Their ratings didn’t so much go down; we just expanded the pool of Spanish-tv viewing, since many Latinos also watch English-language tv too.
Not surprisingly, our ratings didn’t nearly translate to corresponding advertising revenue, as many large national agencies were used to buying only a full network (Univision) for their clients, and KMEX put a lot of pressure on local advertisers to not add us to their buys, at the risk of losing grandfathered special rates and such. They had never had a real competitor before, and they acted like it.
There’s always a lot of initial resistance to a new station, and it’s one I anticipated, by planning to ramp up the station over a period of several years as the advertising resistance was overcome. Our cash flow was a torrent of red ink, but the mood was mostly confident (except for the griping from NY about being vastly over-budget). There was no question that KVEA was going to be successful; the question was only how quickly, and how much money it was going to cost getting there.
As a regular reader of the German auto motor und sport, I was very keenly aware of the all-new Mercedes W124 that premiered in the fall of 1984 in Europe (the US intro came one year later). I’ll sing its specific praises in the related CC, but it grabbed me like no other car ever. Why? It was such a remarkable synthesis of all the ideas and priorities that I had come to espouse as to what constituted the ultimate dream car for me.
It was highly aerodynamic (CD 0.29), and unlike the Audi 5000/100, it wasn’t FWD or fragile. It was narrow and tall, which made for superb accommodations and visibility while keeping the aerodynamic frontal area low. Bruno Sacco’s design was a brilliant synthesis of function and good looks, although that is of course subjective. But I firmly hold that the W124’s design was the most enduring of any modern car ever, certainly since its arrival.
Just about every sedan since has been deeply influenced by its general shape, proportions, aerodynamics, tallness, blunt front end, high tail, large sweeping C-pillar, and many other aspects. No other car that was designed thirty years ago still manages to look so contemporary today.
Just ponder some other cars that were also brand new from the same era. And you wonder why my GM Death Watch really kicked into high gear in 1985, when the W124 and the new Cadillac arrived at the exact same time?
Mercedes (wisely) withheld the W124 from the vital US market for its first year, assembling W123s just for North America. (more on that in the CC), But some gray-market imports slipped in during 1985, and there was a white one sitting in the tiny showroom of an importer on Robinson Boulevard. As I passed it every day in my K-Car, it really worked its juju on me…
Then one day on the freeway, I spotted my first 300E in the wild, a white one too. I stalked it in the next lane like this for way too long, utterly obsessed on the idea of having one. Must… Have. ..Now!
About a month or so later, on an impulse I stopped by Valley Motors on Van Nuys Blvd. after work, walked into the showroom and there it was: a white 300E with blue leather interior. I told the salesman that I would take it if he could get me a lease for under five hundred bucks. He looked a bit dubious, but said he would see what he could do. Interest rates were just coming down from a mind-boggling 21.5% Prime Rate in December of 1980, and still had a long way to go. By this time, the Prime was down to a mere 9.5%, and leases and car loans were still solidly in the teens. And leases then were done through leasing companies; this is before many manufacturers started their own leasing programs, often subsidized.
The sticker MSRP was $36,205 ($76,000 adjusted). Yes, these cars were pricy back then, and there was very little or no discounting going on these new W124s. A new 2014 E350 Sport Sedan is going for $51,900 today, and can be leased for 36 months @ $599 (with $4400 at signing). The salesman called back the next day, saying he found me a five year lease for…$499.99/month, with little or nothing due up front.
Did I bother to run the numbers or comparison shop? Naah; it wasn’t my money; it was being financed by…junk bonds. But unlike so much else at KVEA, it was within the budgeted amount for my car allowance. For that matter, I never test drove it. All the magazines were loving it; Brock Yates was rhapsodizing about the white with blue leather 300E that he had just bought as his personal car, and I knew it wouldn’t make a difference anyway. It will be mine…
So I drove over the next evening after work, signed the lease, (as a corporate VP), left the Reliant to be picked up by the rental company, and shortly later slid behind the big wheel of my dream car. The engine whirred to life as smooth as a only an inline six can. I slipped the notched shifter into D, and felt each gear shift precisely and somewhat mechanically– yet smoothly — in that distinctive Mercedes way.
The steering was a tad heavy at slow speed, but that soon changed as I gunned it and blasted up a freeway ramp. These cars were made for the autobahn, and I wasted no time proving that. And then I got off again soon, for the winding drive home over Coldwater Canyon. Although not a true sports sedan in the modern idiom, the 300E was perfectly ready, willing and able to take anything I could ever dish out on even the most difficult roads. My dream car was now mine, and I was eight miles high.
If it isn’t obvious, let’s just say I loved that car with a passion. I was a very aggressive driver back then, and liked to go fast. And in 1985, the 300E was the world’s fastest regular-production four-door sedan, with a top speed of 140 (225 km/h). Does that help explain why I wanted it so badly? I dubbed it White Lightning.
This was before the CHP was allowed to use radar; they had to physically sneak up behind you and time you with their calibrated speedometer. If one was good at spotting the unmistakable outlines of their cars in the rear view mirror at a distance, one was good to fly.
I’m trying not to come off like a bragging douche here, but I consistently drove at high speeds whenever conditions allowed. Me and the Benz were happiest in the zone between 90 and 110, which was twice the speed limit back then. We spent a lot of time at that sweet spot (and above), conditions allowing. This is what these cars were made for. And my brain was happiest at that speed too: enough stimulus to keep alert, between scanning the horizon as well as the rear view mirror. Probably the equivalent of a really good video game today.
Way too many Americans caught up in Mercedes Mania complained about the stiff ride and hard seats in their Benzes. Well, if you want to float along mindlessly on a sofa at 55 or 65, you bought the wrong car, buddy. Shoulda’ bought a Brougham. The 300E didn’t really “wake up” until it was over 75 or so, and really hit its stride at about 90-110. And those firm but anatomically-correct seats didn’t fully prove themselves until you’d clicked off 600 miles in seven or eight hours, and got out feeling great.
For what its worth, the W124’s brilliant suspension was a bit better at lower speeds than previous generations (W123), but speed was its true calling; at least in my hands. Its top speed of 140 was confirmed on more than one occasion, with Stephanie at my side and our two little kids asleep in the back seat. Very composed…
Did I ever get caught? A few times; but only when I was going “slow” (65-70), distracted with my thoughts and not paying attention (I didn’t speed all the time), usually when coming home from work at night or such. But never once did I get caught going really fast. Of course, that gentlemanly game of cat and mouse ended once the CHP was given radar guns (in 1992, the year before I left CA).
Stephanie and I are both outdoorsy, and didn’t at all like being cooped up in the bowels of LA. The 300E was our escape pod; Friday nights, we’d throw in a few essentials and the kids, and off we’d zoom, across the Mojave to Death Valley, or the Anza Borrego, just following wherever the star on the hood decided to take us. On more than one occasion that resulted in a call to the office on Monday morning: I won’t be in today…We were blessed with kids who were happy in the back seat with their books (or napped) for hours and days on end.
One day in 1986, we got word that Reliance had bought a company (John Blair) that also happened to own WKAQ in Puerto Rico (the source of the Telemundo name). Whoa! Now that was totally unexpected and a more than bit of a shock; I knew that Puerto Rican programming was not going to fly in the predominantly Mexican US Hispanic market, and that the Puerto Rican market was something unto itself, and not really considered part of the US Spanish-language market. It was clear that Henry Silverman and Reliance planned to create a large Spanish language tv company that they could then take public, but without our input. What little they knew about the business had all come from us so far. Oh well; good luck with that…
Next up, Reliance bought WNJU in New York, a long-time independent Spanish-language station, but for a princely sum ($74 million, IIRC), way above what it was worth on a cash-flow multiple, and in a Hispanic market much smaller than LA. The Drexel junk bond printing presses were now running in high gear. And then came WSCV, in the Cuban-dominant Miami market.
What Silverman and Reliance failed to understand is that Los Angeles is where Univision back then was making the overwhelming majority of its profits, despite its network of owned and affiliated stations. TV is all about scale: it doesn’t cost all that much more to run a station in a huge market than a small one. But the ad revenues and commercial rates are vastly higher in large markets, and big market stations commonly have profit margins well over 50%, some even over 70%. Small UHF and smaller Spanish-languagestations were still struggling back then.
In Spanish-language tv, this effect was exaggerated further back then, since LA’s Hispanic population was much larger than any other US city then, and by a huge margin. It wasn’t until closer to 2000 that Latinos had moved into many other parts of the country from the few established enclaves.
In late 1986, Reliance consolidated all of its Spanish-tv properties into a new corporate entity named Telemundo, and took the stock public. The stock was not met with any particular enthusiasm, but Silverman managed to place enough of it with Reliance’s established network of investors, the same group that also kept buying Drexel’s junk bonds. As a consequence, I was forced to convert my shares in KVEA into Telemundo stock, as part of my original deal with Reliance. I was not happy about that at all, given that KVEA would inevitably go on to be worth a huge amount, exactly for the reason stated: it was destined to generate by far the largest contribution to profits in the company (pretty much the only ones, in the early years), and my share in KVEA would have ended up being worth real money.
Telemundo stock went public at $10, and I was a millionaire (on paper) at age 35, a dream fulfilled. But not for long; the price never rose above the initial $10, and soon started its long, terminal decline. But I couldn’t sell as an insider, for quite a period of time. And even if I could have, it would have looked extremely bad, politically.
With the revenue from the IPO as well as selling lots more junk bonds, Telemundo went on a further buying spree, spending top dollar to buy stations in a number of cities. The first of these was in the Bay Area, where I knew the owner of KSTS (San Jose) and helped arrange a deal. I saw this as my way out of the frying pan: I “volunteered/asked” to head up that acquisition/conversion and run it. I was eager to get away from the brewing political troubles at KVEA.
The huge budget overruns there from the rapid expansion into news and other expensive undertakings created some strain in my relationship with Joe, although not overtly; my response to it was to get out before it became a real problem. And it put me in the cross-hairs with Reliance, even though the budget issues were not my doing. And the fact that there were now numerous new big egos involved with the network–managers picked up from the various station acquisitions–did not suit me. I just don’t do corporate politics very well.
Sure enough; shortly after I decided to leave KVEA for KSTS, Silverman abruptly fired Joe Wallach, who had been widely recognized as a key founder and spark plug of this whole undertaking. Wow; maybe I should have stayed at KVEA bit longer, and taken back my title? But the die was cast, and in the summer of 1987 we moved to the Bay Area.
Even though I missed some of the excitement, friends and vibrant talent at KVEA, I was much happier running my own smaller show at KSTS. And unlike KVEA, we consistently underspent and over-delivered financially compared to budget. And I was mostly out of the corporate dog-fighting, at least for a while.
And we bought a dream house, a beautiful old historic former ranch house in Los Gatos, built in 1866. That turned into a bit of a nightmare, when we grossly overspent on its complete rebuilding, expansion and renovation after being severely damaged in the 1989 Loma Prieta earthquake. The Money Pit.
My Mercedes, shod with BBS 16″ wheels and lower-profile tires, soon took us on so many new explorations in the northern half of California. Oddly, this is just about the only picture I have of it, and obviously, it wasn’t the primary target. I just never thought to take pictures of my cars, although I have thousands of shots of kids and family. Stephanie’s Cherokee is just off to the right; a nice complement to the Benz for when our explorations involved really rough roads, or none at all.
The five Los Gatos years were mostly happy ones, except of course that Telemundo was falling off a cliff in slow motion, and which everyone was in denial about. Having bought a slew of stations during the period of 1985-1988, when station values were very high, and financed them with 14% junk bonds, the company was overly leveraged. To make that work, the business would have to have grown extremely fast. But tv isn’t like high tech; it’s more of a sure but steady grower; never explosive.
And Spanish tv didn’t really come into its own until after the 2000 US Census showed just how dramatically the Hispanic population had grown (over 50% since 1990) and spread out geographically. A slower strategy, building a network by relying more on affiliate stations (instead of owned ones) in smaller markets–all anchored by KVEA–would have been the way to go, but as I said before, they didn’t ask me…
The 1991-1992 recession hit advertising revenues hard, and the tv and radio business were impacted substantially. Station values fell. Spanish ad revenues didn’t nearly meet the unrealistic projections that Reliance based the whole company’s future (and public offering) on. I finally managed to sell my stock, now worth a small fraction of what it had been, just before it took its final drop to zero. Silverman split, as it was clear Telemundo was in deep trouble. And who stepped in as CEO? Saul Steinberg himself, as if he had a clue about running this business.
One of the first things he did was hire the then-President of Univision, Joaquin Blaya, to head Telemundo. What he didn’t know was what I knew: that Blaya was over-rated, who had a few good years at Univision because it was so dominant at the time. This is how it all-too often works in business: head up a company that is (already was) intrinsically successful because it has good fundamentals, momentum (and a stranglehold on dominant programming), and it’s all your doing, of course. You’re so brilliant! And then someone hires you away for being so damn brilliant, and things somehow don’t work out so well after all. Ask JCPenney about that.
Blaya clearly disliked me when he was at Univison, for daring to compete with the monopolists that they were, and he systematically started firing top Telemundo executives, one by one, and bringing in his own yes-men. I knew it was just a matter of time, for me, and Telemundo. And sure enough, one day in August of 1992, one of his lieutenants showed up I was escorted out the door. That dream was over, but not just mine.
About this time, Steinberg’s whole empire was beginning to crack. He kept Telemundo afloat for a little while longer by buying up the distressed Telemundo bonds at huge discounts, but by about 1994 or so, he threw in the towel, and Telemundo was effectively bankrupt. Leon Black, a vulture capitalist formerly with Drexel, scooped up the distressed debt for pennies on the dollar, thereby assuming control of the company, and later brought in Liberty Media and Sony as partners. Blaya was quickly shown the door too.
In 2002, after a huge growth in Spanish advertising revenues thanks in part to the 2000 Census, Black and his partners sold Telemundo to NBC for $2.7 billion and assumption of debt, making the total deal worth an eye-popping $3.4 billion. Poor Saul; he threw Telemundo away just a little bit too soon. And poor Paul; his stake in KVEA would have been worth some $30-50 million or more, based on the valuation that NBC paid.
Am I bitter over all that? Nope; that’s how the game is played, and I chose to play. That whole era seems like a distant dream now, as if I’m writing a piece of fiction (it’s not). And one that I was suddenly awoken from one day, and then jerked back into the real world, in many ways much more comfortable and familiar, despite the sudden huge drop in income. I knew going forward that I need to control my own circumstances, no matter how modest, rather than be floating in the currents of others’ making, especially when it’s uphill and there’s not much of a paddle. And my exposure to the lifestyles of the rich and famous left a bad aftertaste.
I soon sold the 300E, which I had bought for myself after the lease ran out. It went to a young woman who had been lusting after one, but didn’t think she could afford it, since it looked just like the ones Mercedes was still selling new. Off she drove in her new dream car. Seeing it drive away was symbolic; the end of that era. Life has many chapters.
And there were new dreams still to be spun and pursued, and I already had other another vehicle in reserve to help me create–and fulfill– some of them. Isn’t that what beds are for…dreaming?