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Sterling Manhattan Cable continued to lose money because the company had only a small subscriber base of 20,000 customers in Manhattan.

Dolan's media partner, Time-Life, Inc., gained control of Sterling when it acquired an additional 60% equity interest, increasing its stake in the company to 80%; Time-Life then decided to close the Sterling Manhattan operation. At the time, Home Box Office's future looked dim: it only had 8,000 subscribers across 14 cable systems, all of which were located in Pennsylvania, and it was suffering from a significant subscriber churn rate.

Rather than stringing cable on telephone poles or using microwave antennas to receive the signals, Sterling laid cable beneath the streets.

Home Box Office (HBO) is an American premium cable and satellite television network that is owned by Time Warner through its respective flagship company Home Box Office, Inc.

Programming featured on the network consists primarily of theatrically released motion pictures and original television series, along with made-for-cable movies and documentaries, boxing matches, and occasional stand-up comedy and concert specials.

As of July 2015, HBO's programming is available to approximately 36,493,000 households with at least one television set (31.3% of all cable, satellite and telco customers) in the United States (36,013,000 subscribers or 30.9% of all households with pay television service receive at least HBO's primary channel), HBO subscribers generally pay for an extra tier of service that includes other cable- and satellite-exclusive channels even before paying for the channel itself (though HBO often prices all of its channels together in a single package).

However, a law imposed by the Federal Communications Commission (FCC) requires that cable providers allow subscribers to get just "limited" basic cable (a base programming tier that includes local, and in some areas, out-of-market broadcast stations and public, educational, and government access channels) and premium services such as HBO, without subscribing to expanded service (Comcast is the only major provider to have purposefully offered the network in such a manner utilizing this law, as it offered a bundled cable/Internet package that included limited basic service and HBO from October 2013 to July 2014, or January of the latter year in some markets).

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In the summer of 1971, while on a family vacation in France, Charles Dolan began to think of ideas to make Sterling Manhattan profitable.