Those Guys Have All the Fun - James Andrew Miller [109]
In 1990, Roger Werner, one of the smartest and classiest people ever to cash an ESPN paycheck, chose to leave; around the same time, KKR, having picked up a 20 percent slice of ESPN when it gained control of RJR Nabisco in 1988, decided it didn’t want a piece of Bristol cream pie after all. In the ensuing sale, CapCities / ABC had the first right to buy the remaining 20 percent but, partly under advisement from consultant Warren Buffett, it passed on the opportunity to become sole owner. Billionaire Buffett later said it was one of the worst business decisions he ever made.
CapCities hired Steve Rattner of Lazard Frères to go chase down a buyer. Don Ohlmeyer and Ross Johnson, meanwhile, had little cause for complaint; they would each more than double their $60 million investment in the sale. Obvious questions arose: Who would replace Roger Werner at ESPN? And who would buy KKR’s share of the network?
ROGER WERNER:
One of my biggest frustrations was that Tom didn’t buy that remaining 20 percent. CapCities didn’t want to write the check, basically because they said, “Hey, we’ve got a lot of issues with our broadcast network; its profitability is declining. We’ve got a 20 percent interest that has no vote that’s completely passive interest. We don’t know why Leonard would have sold it to Ross Johnson. We don’t know why Ross Johnson would have bought it, except that Ross liked to hang out with athletes and fly around on his airplane.” There’s no compelling reason why anyone would want to be a passive investor in a kind of dynamic high-growth situation that admittedly could be very valuable in a few years, but would you really want to have no votes and no liquidity, no ability to get out, and no ability to influence policy as a partner? So Tom looked at it and said, “Anybody who wants to buy it, we’ll sell it to them.”
Once he decided not to buy the rest, my strong conviction was that we ought to bring in a strategic partner so that we had a little leverage with our distribution. I set up a dinner at the Four Seasons restaurant with Ralph Roberts, Brian Roberts, Tom Murphy, and me, to talk about Comcast buying the 20 percent. I think Tom saw the wisdom of that, and that deal did not fall apart because Tom didn’t want it to happen. He thought they’d be a good ally on the distribution side, and we might encounter less resistance in terms of additional fees for additional high-product acquisitions. What happened was, frankly, the Comcast guys, I think it was Brian maybe more than Ralph, demanded too much in terms of voting rights and veto rights with certain important decisions. They tried to drive too hard a bargain. Brian is a very tough negotiator. In this case, he didn’t get a deal that would have been unbelievable for Comcast.
FRANK BENNACK, Hearst Corporation:
As [we were] the largest of ABC affiliates, Tom Murphy and Dan Burke knew us to be good partners. Good partnerships prove themselves out. Many times, you have to defer to the judgment and to the needs of a partner. We had a very strong association with them already by our having started what is now A&E, Lifetime, and History channels together, so because of my association with Leonard, we were approached by Lou Gerstner. He was looking for a buyer at a price well above what we thought it was worth at the time, so we told them we were interested but not at the levels they were talking about.
Lou and I engaged in a negotiation and we ended up making a deal. People