Those Guys Have All the Fun - James Andrew Miller [99]
ROGER WERNER:
When Bill was still president, he and I, along with Steve, had spent a good amount of time thinking about baseball rights. We had talked with Peter Ueberroth early on, and I had drinks with him at the Waldorf when the deal was just opening. I have a lot of respect for Peter, and I think he played all of us potential buyers like a Stradivarius. It was a deal that involved more than a hundred games per season, not because any of the bidders wanted that big a volume, but because Peter very cleverly structured the cable-exclusive baseball package in a way where it would be absolutely critical for an ESPN or a would-be competitor to have it. He made it so big, so heavy, that a competitor could have been launched around that package. If Ted Turner’s TBS had had that package, it would have made them much more competitive as a sports service. If Cablevision’s Sports Channel had gotten that package, they would immediately have become a nationally competitive sports service. And don’t forget cable operators like Malone and Dolan, who could have started a national sports network around it. That’s how big this thing was. Peter understood my commitment to being the leader and being dominant. He knew we were pretty hungry and wouldn’t let that go without a really tough fight.
I remember vehemently arguing in favor of getting the deal done, not at any price but almost at any price, with our parent company guys—Tom Murphy, Dan Burke, and Herb. Dan was a huge baseball fan, so that certainly helped, but we had some very heated debates. I kept stressing that there was enough programming volume there to start another channel. I remember really sweating bullets on that deal until literally the last night. It was a big-time nail-biter. On the night of the final bidding, Dan Burke, Steve Bornstein, and I hung out at the bar at 21, waiting for Ueberroth to call back with the final decision. It didn’t come down until probably midnight, and we all sighed a sigh of relief and had a bunch of drinks to celebrate. I didn’t get back to the hotel until after one a.m., and we had to do a press conference at eight that next morning. The deal cost us $400 million for four years. Peter had played it well and got absolute maximum value out of ESPN. Arguably we did overpay, but I would say we had to, and in retrospect it was absolutely the right investment to make. I rank it a close second to the NFL deal.
STEVE BORNSTEIN:
We paid a lot of money for baseball, so much so that it had a negative impact that first year on CapCities’ bottom line. We misjudged the value of the property. At CapCities you could make mistakes, you just had to make honest mistakes.
CHRISTINE DRIESSEN, Chief Financial Officer:
The first baseball deal was not a good deal. It was for a lot of money, and the league brokered a real tough deal which came during really tough economic times. Basically, as soon as we signed it, the economy tanked, so we were really struggling with ad sales. That was a difficult time.
STEVE BORNSTEIN:
We felt a lot of pressure. We had to pay a ton to get Major League Baseball, but now that we were losing money on it, we were going to have to find a way to fix it.
In June of 1990, Capital Cities / ABC Inc. posted its earnings for the second quarter—a dreary 1.5 percent rise in net income. It also had to warn Wall Street that the current quarter would probably be even worse—below last year’s. According to the Wall Street Journal, the company blamed, among other factors, “the new baseball contract at its 80 percent–owned cable channel, ESPN.” The announcement saw CapCities / ABC shares crumble by almost 9 percent. There were more than a couple movers and shakers—inside and outside of ESPN—who thought the MLB deal was the worst in the company’s now decade-long history.
Although the deal may have cost too much, and the rotten economy made ad sales for the games