COMMISSIONER TAGLIABUE INTERVIEW WITH STEFAN FATSIS - WALL STREET JOURNAL, 12/10/97

How do you approach the TV contract negotiations knowing the leverage you do have and the expectations your owners have?

I know how significant the Fox deal was and I know in some ways it was a decision based on building a network. But I don’t think it changed the landscape dramatically for the NFL. The NFL has had that kind of draw and value for network TV for more than three decades. If you go back and look at some of the deals Pete Rozelle did back in the 1980s, if you look at the contracts we did in 1990, covering the ‘90 -’93 seasons, when we almost doubled the rights fees from the previous contracts, what you see is the NFL for more than three decades beginning with the CBS deal in the early 1960s has had the widest audience on TV by a wide margin, which reflects the fact that it’s become the number-one sport in America by a wide margin. The Fox deal was more a continuation or reaffirmation of the value of the NFL and the popularity of the NFL on TV for 3 1/2 decades than any dramatic change. The NFL will continue to be unique because whatever survey you look at or ratings measurements you see, we still are delivering an audience that is bigger by a wide margin, which reflects the popularity of the game. Another thing that is critical is that we do it for five months and our regular-season ratings for our national games exceed in most cases the postseason ratings for the other sports. So we have been able for decades to deliver audiences and have audiences interested in our games on TV for five months, whereas the other sports are able to do that for only a two or three-week period in their postseason, if they are able to do it then. With respect to baseball, the question of the strength of their postseason programming is an issue. To summarize, for 3 1/2 decades we have demonstrated the uniqueness of the NFL for a mass audience on TV for an unprecedented period of the year. Those are the two things that give us the opportunities that we have going forward.

Are you concerned about the image that the size of these deals reflects about sports these days?

It’s nothing more, nothing less then the reflection of the popularity of our sport and the fact there is passion about NFL football, which is another part that creates the value. From an advertisers’ standpoint, from a network standpoint, we have a very passionate, very committed audience which delivers to an advertiser the kind of brand identification and the kind of demographics that they used to think they could get out of other kinds of prime-time programming but is rapidly disappearing anywhere else in TV other than the Olympics. At the first level, it’s a tribute to the impact of our programming and the popularity of our programming. At another level, you try to run your business in a way which people can respect as being responsible. I think we’re doing that with TV revenues that relate to player salaries through our player system. The quality of the season we are having this year, the strength of competition around the league, the number of teams that are competitive, the number of good young players, the strength of our divisional races is all a real affirmation that our Collective Bargaining Agreement is working. From a fan standpoint, we have had the most competitive season in at least a decade. My sense is, if people are paying a lot to see games and they’re not getting value, then it becomes a concern. Right now, there is a perception that there is tremendous value for the fan in the NFL because we are delivering very high quality football from a fan standpoint. Every Sunday represents a series of events for the fan both in the stadium and on TV. The fact that the fan feels he/she is going to a very special event and getting tremendous sports entertainment, tremendous competition, that’s why we have such a popular sport.

Do you worry long term that some network in the future will say, "It’s too much money?"

No, I don’t worry about it because the reason we have had such success for 3 1/2 decades is intelligent management. That’s a tribute to Pete Rozelle and Art Modell and others who managed NFL TV 25-30 years before me and others. If you make unwise decisions, then you are going to pay the price in the market-place. That is what happened to baseball with the CBS deal in 1990. CBS paid baseball $1.6 billion for four years and paid us exactly the same amount at the same time for four years. Our following deal with Fox represented a tremendous increase and their deal went in the other direction. That has to do with how you manage your TV and make sure you continue to deliver special events on TV.

Isn’t it less of an issue for you than for the networks?

Then it’s not ever going to become an issue. It’s always going to become a speck of concern that might happen five years from now or 10 years from now. People said in 1971, the bubble is going to burst. How can Pete Rozelle continue to have two networks involved on Sunday and now into prime time? People said this can’t continue, the bubble is going to burst. Well, the bubble has not burst because of intelligent management, both of TV and of the sport generally. If you do something that does not represent good judgment, sure your bubble can burst. I alluded to the baseball situation with CBS in 1990. Some people feel tennis has had the same kind of issues where they have had growing interest in the Bjorn Bjorg, Jimmy Conners era and somehow or other, in terms of managing the tour, managing the pipeline of outstanding players, somewhere along the line there was a misstep and it’s hurt them generally and on TV That’s not my judgment but that’s the kind judgment you hear TV people making. The point is, it is within your control. If you manage your TV and your league well, the bubble is not going to burst because you are going to continue to have a tremendous audience, which is value for the network.

You are not unmindful of the fact that the upcoming deal will probably be unprofitable for the networks?

Unprofitable measured by what? Unprofitable measured by direct revenue from advertising sales in game or unprofitable in terms of the total packaging of sports with non-sports? Unprofitable in terms of the value to the affiliate? Unprofitable in terms of the audiences that you deliver through promotion? It depends on how narrowly you want to describe your value. Networks are great at looking at one slice of the value and saying, ‘oh goly it’s very expensive.’ If they look at all the slices of the value, it’s a hell of a deal. Which is why they keep going along with us on the basis that these are fair contracts that reflect the value of the NFL to TV. I’m not so concerned about the bubble bursting as we are concerned about good judgment. The other thing that is unique about the NFL is that we are on five networks and we have the credibility have demonstrated track record of having continued to deliver value to all five of the networks in terms of our scheduling and the strength of the matchups we give to the networks.

Is scheduling an issue with the networks?

No, I don’t feel the networks are concerned about that. I think they feel stronger about that than ever because this year our Sunday night package has been one of the strongest ever, especially in the first half of the season. We had some matchups during the Turner segment of the Sunday night series that were the envy of the nation in terms of sports competition.

Does that hurt the Sunday afternoon games?

No, that’s the point. This year we have had so many strong matchups. One of the things we have tried to do at the request of the networks, particularly NBC, has been to make sure the Saturday games are attractive. Pittsburgh vs. New England (12/13/97) in the late time slot, that is not an accident, that is responsive to the network interest in having a strong game in that time slot. We have very strong NFC teams but we have strength in the AFC now. And not only strong teams but strong attractions on those teams. Mark Brunnell, Drew Bledsoe, Brett Farve. The outstanding young players and all of that gives us depth for all the networks.

Do you have a time table for when the serious talks will begin?

We have been having serious talks for quite a while and I think we will have some decisions after January 1.

Will the package expand to a sixth network, or will it stay the same?

I would think it would be the same. From the standpoint of the fan and the viewer on TV, it’s a very strong array of games and a good mix of broadcast TV and the Sunday night package. Plus the ancillary programming ESPN does like Prime Monday. We will have some additional programming but it is not likely to be live games, it will be features and highlights.

Is a Saturday morning package possible with a kids’ emphasis?

There are a number of things that would go under the heading of NFL programming. It could be in prime time or it could be on Saturday. We’re talking about a range of things, focusing on special features and highlights, but it could be in a number of different time slots.

Do you feel there is more value to offer in addition to the games?

I don't think it’s so much a question of value as it is a question of interest in the NFL and features that will focus on in-depth analysis of the game, such as what ESPN is doing, or getting to know the players better, seeing the players in three dimensional ways off the field as well as on the field or understanding better what a leadership role means on the field. Player features and in-depth understanding of the game, plus young people, those are the three key areas.

Are you currently talking to all the networks at this point?

We are having conversations with everybody who is interested and all of the networks understand that.

Can I safely say that CBS is still involved at this point?

All of the networks, including CBS and Fox, are actively interested in the NFL. CBS knows the value of the NFL probably better than anyone in sports. They had it for longer than anyone. They had what Ruport Murdoch called the "crown jewel package" which was the NFC. I’m sure that Roone Aldredge would argue about what the "crown jewel package" is. But that’s one of the luxurys we have. We have several different "crown jewels." A "crown jewel" on prime time, a "crown jewel" on Sunday and a "crown jewel" on cable.

Has the advertising issue been a factor in the talks?

I don’t think it is an issue. If we use good judgment, and continue to deliver the kind of football that we have been delivering, we will be an extremely strong platform for any advertiser looking for the best platform in TV

As I said earlier, we will be wrapping up these negotiations by sometime after the first of the year. Exactly when is unknown at this point, but we are talking about large contracts which will be ultimately five packages dealing with a larger number of potential parties than that. It just takes time to be thoughtful, to do the kind of analysis you want to do and make sure that what you do is sensible not just for the next 3-4 years, but for the next decade. There are obviously some technology issues we’re looking at, anticipating the future, high definition and interactive TV, plus the internet and other new technologies that can ultimately become mass media for sports. In the past, the issue was managing coming from one network, CBS, to multiple broadcast networks and then coming into cable in the late 1980s in an intelligent way. We did some unique things, such as guaranteeing the broadcast coverage of the games of the markets of the two participating teams. And we managed the evolution into Satellite TV with the Sunday Ticket program very effectively, blending it with the other packages. Now the question is, as you try to anticipate additional technology, whether it be high definition or interactively or the internet, what kind of options do you want to have available so that the growth is complimentary and expands the audience and expands the quality of the service and does not all of a sudden become conflicting or negative in some way? Most of those issues are still out in the future and I don’t anticipate major changes in the current packages. But you want to make sure you are well ahead of the curve anticipating the future and not playing catch-up at some point.

Are any of these talks tied to a new Collective Bargaining Agreement?

Yes. The longer you can ensure the health of your sport, including labor peace, from a fan standpoint the better off you are in terms of TV contracts. We are having discussions with our union right now about the CBA and some refinements that might be made in the CBA. If we can get some refinements, that might be the basis for an extension of the CBA. Those discussions have been going on for some months.

You don’t want to take the risk that you are floating out there with a set TV contract 6-7 years from now and not have an understanding of what your labor costs are going to be?

You don’t want to have good solid TV contracts and the inability to deliver your product to the networks, which is what happened to baseball in 1994. You don’t want to have a strike or a lockout when you are trying to structure some stability with the networks. Once they sign contracts with us, they are going to go out to the advertisers and try to secure long-term commitments from major advertisers. Once they do that, the worst thing that can happen is that you interrupt your programming because you have a strike or a lockout. It’s bad enough to interrupt your programming because you lose a satellite. It’s worse when you lose your games.