Entrepreneurs with good ideas and the right timing can find capital to finance their business if they build strong support networks, according to Robert L. Johnson, founder and chief executive of Black Entertainment Television (BET), during a presentation Dec. 5 at Wharton’s Whitney M. Young conference.


During his remarks Johnson urged African Americans to develop a culture that appreciates wealth. “There is a tendency not to talk about the idea of generating or retaining wealth,” he said, because it is perceived to be showing off. “We [need] a different mindset. We [need] to have people praising African Americans who generate wealth as much as” they praise African Americans who are “social activists and community leaders.”

In 1980, Johnson founded BET, a cable television company tailored to African Americans that now reaches 75 million households in the United States, Canada and the Caribbean. He sold it for $3 billion in 2000 to Viacom, parent company of CBS, MTV, VH-1 and UPN, although he retains the title of chairman and CEO.


Johnson became the first African-American owner of a major sports franchise in 2002 when he paid $300 million to bring a new National Basketball Association expansion team, the Bobcats, to Charlotte, N.C., beginning with the 2004-2005 season. He also owns the WNBA’s Charlotte Sting.


The entrepreneurial drive to create BET arose from a fear that someone else would do it first, said Johnson. If that had happened, “I would have hated myself for the rest of my life. To be honest, the entrepreneurial path I traveled came about most of all because I never really liked the idea of working for anybody. I just didn’t like taking instruction.”


Twice Johnson worked for others. His first job was a paper route in his hometown of Freeport, Ill. He didn’t like getting up early and wound up dumping the papers in a garbage can. Later he worked at a battery factory where he was required to continually sweep black pitch from under a conveyor belt. “It seemed a waste of my time,” remembered Johnson. “If I could sweep every hour or so, the rest of the hour I could talk to the young women working on the line.” His supervisor didn’t see it that way and insisted he sweep continuously. The two parted ways.


A Need for Content

Johnson went on to the University of Illinois and later earned a master’s degree in international affairs from the Woodrow Wilson School of Public and International Affairs at Princeton University. After Princeton, Johnson moved to Washington D.C. and worked as a press secretary for the District’s representative in Congress, Walter Fauntroy. He then became a lobbyist for the National Cable Television Association.


In those days, a group of entrepreneurs, including CNN’s Ted Turner and ESPN’s Bill Rasmussen, were just starting cable-television ventures. According to Johnson, Rasmussen had set out to find a way to show hockey games within Connecticut, but soon discovered that with satellite and cable he could televise hockey games around the entire country. “I’m in an industry made up of pioneers who met a technology shift – satellite television – that delivered programming to cable systems, particularly in urban America,” said Johnson. “There was a need for content – and diversity of content – to be able to get people to pay $30 to $40 a month” for the service.


Like ESPN and sports, Johnson had a niche – black programming. “BET is really an extension of what John Johnson did with Ebony magazine,” according to Johnson, who is not related to Ebony’s founder. The magazine was developed during an era when major, mainstream magazines like The Saturday Evening Post, Look and Life were not chronicling the rise of the black middle class. “No one was talking about this population that wanted to read stories about its successes and accomplishments … BET is a magazine with moving pictures,” he noted. “It’s not a new idea to target African Americans – newspapers had been doing that forever – but it mirrored the technology of the time, satellite and cable.”


According to Johnson, raising the funds to start BET was not the obstacle it often is for entrepreneurs. Through his job with the cable association, he knew John Malone, the founder of Telecommunications, Inc. Malone gave him $500,000 after a half-hour meeting. “I didn’t have to hock my furniture or call relatives. They didn’t have any money anyway,” said Johnson. Malone agreed to give him $180,000 for a 20% stake in BET and loan the company an additional $320,000. “What Malone didn’t know is that if he had reversed the numbers I would have said, ‘John, that’s a deal.’”


Malone brought more than money to BET, he adds. “All of a sudden I had a major investor allied with me who was in the same industry. This was not a small business loan where they say, ‘I’ll give you enough money to fail.’” Malone joined the BET board and helped the company win subscribers through his own cable systems. Malone’s name also helped when it came time to get additional financing. “He was my Good Housekeeping Seal of Approval,” said Johnson. “Every successful person has mentors or a lot of advisors. In my case it was John Malone.”


Selling, Not Selling Out

When Johnson decided to sell to Viacom, he was criticized by some members of the black community for giving up African-American ownership of the network. But according to Johnson, BET is different than most African-American businesses, which are entirely black-owned from the start. BET always had outside shareholders; Johnson never viewed the business as a family heirloom.


“My focus at some point was, ‘you have to give your shareholders the maximum return,’” he said, adding that the multiples then being paid for media companies convinced him it was the right time to sell. He insisted on a stock swap to cut his tax bill and asked for complete control of the business if the new owners wanted him to stay on. BET is run the way it always has been, he noted. “The content is the same. The editorial direction is the same. That’s the way Viacom wanted it. When Viacom acquired BET, it paid more for an African-American business than had been paid by anyone in the world. Viacom had no desire to shake up that model.”


According to Johnson, BET’s acquisition by Viacom has become a strategic advantage because BET now can cross-promote programs on Viacom properties, including CBS and MTV. BET is also now able to challenge advertisers who have tended to pay BET less money than they paid MTV and other Viacom businesses – for the same content and audience. After all, Johnson now has access to the books at those Viacom companies. He in uninterested, he said, in working in management at the parent company. “I have no desire to run anybody’s business other than my own.”


After selling BET, Johnson began to look for a “perch” to leverage his success the way more visible African Americans, such as Oprah Winfrey and Michael Jordan, have been able to build entire brands around themselves. “I can leave BET tomorrow and walk into a jewelry store with jeans on and they’ll probably tell me to assume the position,” he said.


What he needed was a way to build on his wealth and business. “The idea is there’s a Bob Johnson factor. How do you parlay the Johnson factor into other assets?” He settled on the NBA because it was a business he liked and understood. “The team itself will make money, but not a lot compared to what I could have done with $300 million. More importantly it gives me something to do and it has value in other areas.” In addition to his BET and NBA jobs, Johnson is developing hotel and restaurant properties, and gaming and media businesses through The RLJ Companies. He has raised more than $250 million in real estate financing and is considering opening a real estate fund.


The Johnson factor, he suggested, can generate access to capital and draw talented people to work with him on his new ventures. Greater visibility also attracts people with deals to offer and, he pointed out, “I can get my phone calls returned.” But Johnson understands the need to balance that clout carefully so that he does not block other African Americans from developing their own links to business people and capital.


“Once you get recognized and noticed, there is an unfortunate tendency to lock out people coming up behind you. There’s a tendency for many white corporations to consider you the go-to-guy,” Johnson noted. “Part of it’s logical. They say, ‘He’s got money. Let’s put him on a board.’ There’s a value to that but to some extent it doesn’t make a lot of room for people.” In addition, “once [executives] do business with one black company they can say, ‘I’ve done my black thing. I’ve got one black director, that’s it. I’ve got one black senior executive, that’s it.’ You have to keep that door open and make sure there are opportunities for people who are coming up.”