MBN USA, Robert Johnson talk on the realities facing minority business

Robert Johnson is regarded as one of the nation’s leading African-American entrepreneurs. Don McKneely, founder of MBN USA magazine recently sat with Johnson for a casual yet insightful conversation about the history of BET, the effects of politics on minority economic development and the mindsets minority business owners must embrace if they are to rise in the mainstream economy.

MBN USA: Today, Black Entertainment Television is a thriving and well-respected enterprise; but we know that even the largest conglomerates began as a mere thought or idea. With this in mind, when thinking in terms of the concept-to-market cycle, give a brief chronology for BET.

Robert Johnson: Well, BET started out as a concept probably in August of ’79 and went on the air in January of 1980.

MBN: It is my understanding that when BET was sold to Viacom, the purchase price was approximately $3 billion. What was the valuation at the time of the sell?

RJ: The company sold basically for what Viacom bought it for, so the valuation was basically what they paid for it, so about $3 billion.

MBN: Where would you place the valuation of BET today?

RJ: I would say BET probably increased its value [about] $5-$6 billion. At the time I sold BET to Viacom, media companies were at their highest valuations in terms of the multiple against the cash … it’s a little bit lower now; but BET is very valuable and I doubt if Viacom would part with it for anything less than $6 billion.

MBN: In terms of the capital requirements when you started BET, how did those requirements change over time and how did you address these changes?

RJ: The business is always evolving and that’s one of the truisms about a business — it’s never static if it’s growing, and obviously, you want your business to grow. So, we dealt with things — if we wanted more advertisers, we had to be more aggressive in selling our programming; we had to make the case that we were reaching the right viewers who buy the advertising products; we had to show them our measurements of how we determine that. In terms of cable penetration, we had to impress upon the cable operators the value of BET programming in their markets, so that not only African-American subscribers would want to carry it but white subscribers as well. Technology — we had to make sure our technology was in place to help distribute our program by satellite, which meant we had to make sure our satellites could reach the right cable operators. And we had to deal with regulatory issues when the government would try to impose restrictions on cable in terms of whether the cable would be charged to an individual on what they called a la carte basis—we had to oppose that. When the broadcasters [wanted to accommodate] a broadcast signal but not [a] cable channel, we had to oppose that. So, you’ve got to be able to look at your business as an evolving business, as a strategically changing business — you have to stay on top of it.

MBN: Looking back over BET’s span, if you had to identify a defining moment that made a critical difference in the success, failure or setback of BET, what comes to mind?

RJ: I think the defining moment was when BET went on satellite 24 hours per day and we made sure we were competitive with the other cable networks that were going 24 hours per day — that made us a real network, rather than just being on air three hours per day or six hours when we started out. So, I say 1984, when we went 24 hours on satellite is a defining moment.

MBN: Thinking about the deals you’ve gotten involved with since you sold BET, for instance the Charlotte Bobcats, are there other sports franchises you have interest in or are you involved in any other sports franchises?

RJ: No, I think one sports franchise is enough.

MBN: Let’s talk for just a bit about DC Air … I know the public was anticipating a major announcement. What is the current status?

RJ: DC Air was one of those businesses where there was an opportunity to put together an airline out of a merger of United and US Airways that I was going to operate to be called DC Air. Unfortunately, the government, the regulatory department or the justice department refused to allow United and US Airways to merge and that killed DC Air as a business opportunity.

MBN: Well, everyone was very excited about that opportunity.

RJ: Yes, I was too …

MBN: Shifting for a moment to look at politics, what role do politics play in the success or failure of minority business?

RJ: Much of the whole existence of minority business is really a political creation, not an actual fact and most people don’t show up and say, ‘I’m a minority business.’ They say, ‘I’m a business person. I am a business man or a business woman and I can provide you with this quality product or this quality service.’ Because of economic and racial discrimination against minorities, [as] African Americans, we’ve had to come up with a justification and rationale for why companies ought to do business with just plain good companies and therefore, we get minority business. So, being involved in politics as a business person is very important, because of a lot of the policies and programs that have restricted minorities from being in business were passed by elected officials. Slavery was an elected official decision. [When thinking about the three-fifths of a person ruling] — we didn’t have the right to vote at that time; since that time, decisions made by the Supreme Court to say that any minority business must be of compelling government interest was a political decision because the judges were appointed by elected officials. Certain commitments of companies to support minority business are encouraged or discouraged by elected officials; so politics are very important for minority business.

MBN: Now that we are talking politics, where do you stand … Democrat or Republican?

RJ: I’m a Hillary supporter; I’ve been that way for a long time — since President Clinton was in office. I’ve known them over 17 years, so I’m a Hillary supporter. But in terms of what I think is best for business, I’m going to say Republican. Democrats tend to be not as supportive of minority business, or not as supportive of business in general and as a result of that, I don’t think they’ve been as aggressive as they should be, especially in light of the 90 percent vote rate they get from African Americans.

MBN: Moving away from politics and on to contemporary role models … are there any who come to mind for you?

RJ: I think there are a number of role models – the guy who helped me start BET, John Malone, is clearly a role model for me because not only did he put money in the business, he put his stamp of approval on the business and leveraged that to help me grow the business. Obviously, when you look at other players, John Johnson founded an institution [Johnson Publishing Company] and maintained that institution over the years. Barry Gordy [record producer and founder of the Motown record label] created a brand that is a global brand. Reginald Lewis was the first guy to play high finances in creating Beatrice Foods. So these are the guys I’ve respected — good, solid business people.

MBN: And mentors?

RJ: I’d have to put John Malone in that category.

MBN: Historically, minority businesses have had trouble when it came down to access to capital. What expertise can you offer MBEs who are looking to increase their access to capital?

RJ: Well, there is plenty of capital out there … the problem with minority businesses is exactly in the definition of minority business. If you are required to maintain a certain level of minority ownership, it just by fact is going to limit your ability to take in outside capital to grow your business. And so I think it’s time that we move away from the definition of minority business based on who’s the equity owner and focus on the businesses that are based on value delivery and creating opportunities within the minority community. And I would argue, if you are the value guy, you are the creative genius — you’re the organizational expert or product knowledge provider, you own 10 percent of the company, then that’s a minority company, because you are the driver. You know, when I look at a basketball or football team, the quarterback is one of 11 players — he’s the key. No one is going to say that Tom Brady [National Football League quarterback for the New England Patriots] is not the key to that team. He’s one of 11. So, why not take that approach to minority business, because the only way to get capital is giving up equity or you take on debt and if you take on debt and you can’t manage the debt, and then you’re in trouble.

MBN: You brought up equity. With that, I understand you to be involved with a new fund.

RJ: Yes, we created the RLJ Private Equity Fund with the goal of raising approximately $300 million of equity to invest in mid-sized businesses to help them grow, perhaps to take them public and to help them better recapitalize themselves for growth. By investing in these businesses and holding them for a number of years, we project that there will be a greater value to return to our limited partners and to our shareholders.

MBN: Lastly, Bob, if you had to change one thing over the history of BET, what would that one thing be?

RJ: I think early on, that we should have taken on more debt and bought more businesses. I think the biggest thing we failed to do and something I wanted to do was to merge with Radio One — we didn’t do it and it would have been a great business and something we should have done.