Those Guys Have All the Fun - James Andrew Miller [187]
When ABC first bought ESPN, everybody thought it was a joke, not a serious acquisition. In 1984, we had looked at buying all of ABC for $2 billion, including ESPN, but we were considering NBC before General Electric bought them. Later I heard rumors that investors were circling ABC, but Leonard Goldenson [ABC chairman] told me, “We want to be independent; we don’t want to sell.” So I said, “Okay.” Six weeks later he sold it to Tom Murphy and Warren Buffett, so I guess I was the dodo there. I believed him.
But, of course, almost a decade later, in ’93, I’ve got Tom Murphy and Dan Burke wanting to sell the company, and Dan is sending me information as part of the negotiating process. It turned out the information was low as to what ESPN was doing. That’s how fast ESPN was growing; faster than even Dan could follow month to month. In fact, the ESPN financials were pretty awesome, but I didn’t have the right figures. Mine were lower than the reality. So I called Tom and I said, “Tom, this doesn’t add up; we can’t do it.” He said, “Michael, that’s the price, tell me you want to do it now, or the company will be off the table.” I said, “Tom, we can’t pay that price.” So the deal fell apart.
Three weeks later they came out with their earnings, and ESPN was probably, I’m guessing here, 60 percent higher than what Dan Burke had sent me. I called him up and said, “Dan?!” He said something like “You know what, Michael, I think I read a figure wrong. It was a two, not a one.” I think if he’d given me the right figures, we would have bought it then.
I was still on the hunt to find an acquisition that would add a new dimension to the Walt Disney Company. Lion King was about to come out; I knew it was going to be a giant hit, but I knew our movies beyond that, I knew how far we’d pushed our parks, I knew how Euro Disney was doing. I knew that we were going to grow but not at a high enough percentage rate for the next ten years. The only way I could see that kind of ridiculous growth would be with a new leg on our company, something like ESPN. So here is what happened. I made a deal to buy Capital Cities/ABC with the CEO Dan Burke. I felt the deal was done, and of course it included ESPN.
So [Disney president] Frank Wells, Sid Bass—our major shareholder—and I go to Dan’s apartment in New York, and we’re sitting there with Dan, Tom Murphy, and Warren Buffett. Sid and I think it’s too quiet, and we’re here to celebrate the deal, so I made a joke and said, “Where’s the champagne?” And Tom Murphy says, “What’s the price?”
I said, “What do you mean, what’s the price?” Tom says, “What’s your offer?” I said, “Well, Dan and I have agreed at X dollars,” and Tom says, “Not enough.” And I said, “Tom, your CEO and I have made a deal.” He says, “It’s not enough.” And Warren’s not speaking, so two things became very clear to me: Tom Murphy was the boss—I don’t care that he didn’t have the title CEO—and Warren Buffett was Tom’s real partner in this kind of decision, the owner, so to speak. So I learned a little bit about business that night. I had been dealing with the wrong guy. Dan ran the company, he was fantastic, he was Tom’s partner for decades, but he didn’t make that kind of decision. And he was sitting there in the chair saying nothing.
I was pissed, but I didn’t say anything. Frank and Sid were annoyed as well. Instead of saying, “Okay, let’s still do the deal,” because they didn’t want that much more, let’s say (I’m making all this up) it was $17 billion and they wanted $200 million to $500 million more. But I was not going to do it. And neither was Sid and neither was Frank. So we walked out. We didn’t get the company. They repurchased their stock on Dutch auctions.
Now it’s two years later, and I run into Warren Buffett and Tom Murphy in the parking lot at Sun Valley. They still wanted to sell. They didn’t believe they had all the management they needed. Charlie Munger [Berkshire Hathaway vice chairman] hates the entertainment business, and they had just had a ten-year ride. They wanted out and