Art of the Tube; Market This: HBO has put America ahead of Britain as the leader in quality TV, and it's rolling in profit, to boot.

Byline: Carla Power

About a decade ago, a bunch of top executives at the cable channel HBO were sitting around when Chris Albrecht, then president of original programming, dared to ask a dangerous question. "Are we what we say we are?" he recalls saying. "We'd talked about being this really cool service that was different." Slowly, recalls Albrecht, now HBO's chairman and chief executive, the execs had to admit they weren't.

The meeting kick-started a risky strategy: giving writers time, money and freedom. HBO went to Tom Fontana, a writer it had been "toying with," as Albrecht puts it, having him develop a series but demanding numerous rewrites. HBO went to Fontana and said, " 'We've really screwed up your idea'," recalls Albrecht. " 'Here's a million dollars. Go give us your vision of what the show is going to be'." The result was the acclaimed prison drama "Oz," the first of a clutch of shows--"The Sopranos," "Six Feet Under" and "Sex and the City"--that have made the channel a byword for edgy and, arguably, put America ahead of Britain as the producer of the world's highest-quality TV shows.

In 2004 HBO received 124 Emmy nominations and took home 32. It has drawn Hollywood and Broadway talents like director Mike Nichols, playwright Tony Kushner and actors Meryl Streep and Al Pacino, and created its own cultural force fields. Sarah Jessica Parker's style has leaked out of her "Sex" role and into countless glossy magazines. Po-faced academics deconstruct Tony Soprano's therapy sessions. Foreign copies range from British dramas about gangsters in London's East End to an Indian TV show, "A Little Love and a Little Fun," about three pretty city girls. In 2003, Albrecht's address to a rapt audience at the Edinburgh Television Festival seemed to confirm the new esteem, at least for this American TV channel. Robert Thompson, director of Syracuse University's Center for the Study of Popular Television, calls HBO "by far the most exciting place right now for television art."

It can afford to be. Kagan Research estimates that HBO's cash flow will top $1 billion in 2004, up from $477 million in 1998. "Sex and the City" and "The Sopranos" recouped the production costs of their early ...