Big Ten Network Teleconference - June 21, 2007
Opening Statement from Big Ten Commissioner Jim Delany:
Let me just spend a few minutes, because I know many of you have followed the network and there have been some developments which I would like to put into focus. Initially, we said we would like to be up to 90-100 staff members, and today we're at about one-third of that, but we are making progress.
Of course, a big part of that is we have our leader on board in Mark Silverman, who brings a wealth of energy, leadership and savvy to his position. It's been great working with him, I know he's been on all 11 of our campuses and has met with our presidents, our coaches and is doing a fabulous job in the early months prior to launch. Another noteworthy addition to the staff is Kevin Weiberg, who as you know has served extremely well over the past nine years as commissioner of the Big 12. Prior to that he was deputy commissioner at the Big Ten. We look forward to him joining the staff in middle July. Many of you know him and know what a quality person he is, so it's great to have him on board.
I think basically, what we'd like to think about right now is the network standing for really three things. Fabulous content - we're going to have 400 events. We're going to have quality basketball and football games, archives and coaches shows. And we were able to obtain 4,000 Big Ten archived games - Big Ten classics that bring the history of the conference into the present day. That was an important element to start this enterprise. More importantly, or as importantly, it's really what we call the Big Ten triple play. That is the cable network itself, at its launch, we will have 350 events in HD, which is the largest number of HD events for a new network ever. That's the network and that's the HD component. We will also employ broadband as well as mobile technology, so that's the innovation and the content. We'll talk a little bit about distribution later, but I think It's important to be thinking along the lines of content offering not just eight events or 10 events - it's a broad-based content in the context of the latest technology including a heavy, heavy HD component.
Let me just move at this time to the programming announcement that is the reason for today's call. For the first time in the history of a television network - cable, over-the-air, what have you - we are going to make a commitment, which I will describe in some detail, relative to women's athletics. But before I do that, I want to put into some context the commitment that Big Ten institutions and Big Ten universities and Big Ten communities have had relative to women's athletics, especially over the last 20 years. Twenty years ago we were more than 70 percent male and less than 30 percent female in terms of our participation. In the early 90's the universities committed to move to 60-40. That was done ahead of schedule, and today we're somewhere around 48-52 in our participation rates. We've added 2,000 women's opportunities, 28 or 30 new teams, four or five additional championships. We've developed the Dream Big campaign, directed at young girls kindergarten through eight, focusing on lifelong benefits of healthy competition and healthy eating habits and learning to compete. We're quite proud of what has been accomplished in the area, but we're not finished yet. We have not been able to do all of what we have wanted to do in terms of women's athletics and the public.
In particular, with our existing TV partners, we've been able to make some progress, but in our ABC and ESPN arrangements, 100 or 120 events go there for the men and we're able to get about 10 for the women. It just hasn't come as quickly as we hoped it would. We've also bought some production time and built an additional 40 or 50 events. Annually, with the launch of the Big Ten Network, conversations occurred inside the Big Ten, with our partners at Fox and with Mark Silverman with his production people at the Big Ten Network. And after a lot of discussion, looking at the business side of this and looking at interest by sponsors, looking at the growth of women's sports nationally, the importance of not only female student-athletes but female students and the importance of sports to young girls in America, the conference is announcing today, along with the Big Ten Network, that within three years of the network's launch, the network will commit itself to program what we describe as "event equality" across the spectrum of Big Ten Network controlled media. That will not be done at the expense of men. We expect there will be 350-380 events in year one, and we expect by year three, to complete this statement and provide for our teams, our female student-athletes, their fans, families and our publics, a total execution of this commitment so that whether you are male athlete, a female athlete, a coach of a women's team, a coach of a men's team, regardless of the size of the stadium, the network will be true to continuing its commitment to female athletics in the Big Ten. That completes, what we describe as the four legs to the Big Ten Network table. One - compelling content. Forty to 45 percent of our football games will be carried, in excess of 60 percent of our men's basketball games will be carried. They will be carried in a commercial context of alcohol-free advertising. It will also occur in the context of 660 hours annually of university programming in arts, medicine and any other area of history, media studies, whatever schools want to bring to the public and their alumni. And lastly, the fourth leg is a commitment to event equality. We think these four commitments bring this network into total alignment with the values of our universities. We believe that properly reflects their values and we believe it has now additional appeal to alumni and the fan base, not only through the country. But particularly within our Big Ten eight-state region. Let me stop at this point because I'm going to segue a little bit into the distribution and rate issues, but at this point I wanted to give you an update, number one on the network, 70 days from launch, as well as this commitment to event equality which the Big Ten Network is making to the Big Ten Conference and to all of its male and female student-athletes.
Questions from the Media
I am surprised to hear that you are going to be offering alcohol-free advertising. I wonder if you could comment a little bit further about that and what sort of revenue hit you might expect to take on that.
That's hard to say. When we studied alcohol advertising in other partnerships - this is not really a partnership, more a joint venture - but in other partnership agreements with ESPN, ERT and ABC, depending on the economy, depending upon the competition that was occurring in that area, I think we used to estimate the value of the advertising to the entity was probably somewhere between seven and 15 percent. I know that the NCAA has employed some devices to control it, using educational messages, but this is something our presidents felt was important. To be honest with you, there are difficult issues related to binge drinking and alcohol consumption on campus. A lot of viewership is younger, and so when we became the majority owner of this entity, our presidents felt it was important, our partner Fox was agreeable. It's hard to say what it cost us or didn't cost us because it was a precondition to going forward in this venture.
So you are saying that in your first year you will be showing 400 live events, is that right?
That's a good number. I'd say somewhere between 380 and 400.
In regards to women's sports, is the equity in terms of number of events?
It would be by number of events. I think the best way to think about it is, we're going to start off without making any commitment, just sort of on the natural flow of the programming, we thought we could get in or around 40 percent.
It will be 40 percent women's events in the first year and by the third year it will be 50 percent?
When you do 398 or 412, there might be one or two more women's events or one or two more men's events, but the goal is to come at or near to equality.
When you're in year three, that 400 number, is that about what you expect it to be at?
We could be more; it sort of depends upon how much we're able to bring into play. I think it could be more depending upon the use of broadband and various technologies that we're going to have. The linear network - we're going to have a significant HD component of that. Additionally, there will be broadband applications and mobile applications. I don't know how many events there are in the Big Ten, but I think there might be around 4,000-5,000 events. I think you'll see a lot of men's events on broadband and a lot of women's events on broadband. I don't think you would see less than what we have on network. It depends on how the business model goes, but I think we're looking overall within the network-controlled media to get to equality.
You mentioned there was interest from sponsors; do you think is part of it?
We think it's a growing area. We think there's a strong demographic interest in Big Ten universities and Big Ten sports and women's sports in particular. We've had the good fortune - many of you have probably read about the Northwestern lacrosse team's success of winning three national championships. We have won a national championship in softball - sort of sports that aren't associated with Midwest competition. What we're intending to do is take what we're excellent at and grow it. We do believe that there are additional opportunities that have been unexplored. To say that they're unexplored is probably an overstatement because I think that some of the networks out there like ESPNU and CSTV to some extent do this more. It is our vision to take the experience of the athlete - the male and the female athletes - where there's excellence and highlight it. We've won national championships in 20 different sports in the last 19 years. Everyone thinks about football and basketball, but we've had wrestling champions and lacrosse champions and we've had golf champions and synchronized swimming, what have you - I don't want to leave anyone out, but I think we've won 19 or 20 national championships in different sports and we feel that by focusing on excellence and equality and national success, in addition to the football and basketball, we know that there's an audience there, but we also think there's an audience among the alumni of these universities. We've got greater than four million living alumni in our region, probably three million, and we've got 400,000 students at our universities and the number's growing every year, probably by 70,000. We think, with the demographics we have, with the following we have, this is a natural plank in the overall policies that have developed over the last 15 or 20 years to enhance the role of our women student-athletes.
What are you going to show during the summer?
We have archives that will be getting quite a bit of use. We'll have special programs, reviews and previews. We have football starting up in August. We can be on campus perhaps more than we've been there before. I think July will be a difficult month. I can't think of any other network, whether the YES Network or the Mets Network or the Portland Trailblazers Network or the variety of other networks, but I think the June 20th period, we have a lot of review shows and highlight shows coming off the season. We've got the archives. To be honest with you're we're going to be out there looking for events which are meaningful in the Midwest to the people that follow college sports and Big Ten sports. I think that's going to be an area that we have to do some work on.
The NFL Network, for instance, showed a couple college bowl games last year, in that it may be a peripheral tie-in, but obviously it's not directly tied to the NFL. Is there a chance that you may explore some things? I'm thinking about Minor League Baseball - is there anything out there that kind of intrigues you?
I'm making this announcement because I think it's so inextricably tied to what the Big Ten institutions and universities have done in this area. In terms of that, we've got a VP for production and a VP for programming, and Silverman, and I'm sure they'd be happy to talk to you about that. But as we move toward the launch, we are so focused on September and then eventually getting to May. But I do think that those things are opportunities. I know there's a lot of interest in youth sports, but we have to be careful about that. I think Minor League Baseball is a terrific thing, and I think about the Drake Relays and the history of the Drake Relays. I think that there is a fascination with things athletic and I think that having the number of hours we have and the technological capabilities, we will come up with something, and no disrespect intended, but more than tractor pulls.
In regards to event equity, are we talking about equal number of hours in prime time? And also, what about the possibility of a women's-only channel?
Well, Oxygen is maybe a women's-only channel, I don't know. I'm sure somebody could think about it. I think when we have overflow events, there may be opportunities. I know this - and not to steal anybody's thunder, but there will be committed periods of time in prime time, there will be committed days when women's sports are especially featured. I don't want to go into more detail than that. I can tell you that we consider the female competitor, the female teams, the excellence that is produced to be an integral part of the success of this network. I'm really struggling with keeping up with the Big Ten Network and its launch, so to be thinking about a gender-specific network is probably for the next commissioner.
With the sponsor interest that you are talking about in regards to the programming, you know the number of events you might have available? Can you foresee the day when there is an ESPNW or a Big Ten Women's Channel?
I can conceive of it. You can conceive of the idea, then you obviously have to build the business model and make it work. But when I think about the Big Ten Network, I think about Big Ten Networks, you know, multiple channels - iPods, broadband, HD, we'll have overflow channels in some cable environments, we'll have overflow in the satellite environment. I think you have to think beyond the linear network. Most of my friends were raised in the three-network environment, and then it moved to 30 and then it moved to 150, then to 500, and now in the world that we live in, the world has flattened out in terms of cost of the production and ability to get it out maybe the universe and people globally. We do have the content. We have fabulous content. I think we were limited in our vision with respect to what we could do, and as we thought about it, we thought it was doable and there was a business rationale. We thought it put us into complete alignment. We thought the programming and the alcohol-free and the university programming - it's a terrific alignment with what the universities have stood for on this issue for several decades.
Are the Drake Relays something that are really on your mind as a possible alternative in terms of trying to get them on the network? And, in mentioning the youth sports aspect of possible programming, would that be like AAU, club soccer, etc?
I've thought a lot about instructional. I was watching the Golf Channel the other day and I really liked some stuff I was watching for young people - the balance, building the core. The more I look at networks out there, I think they can be educational, and if you wanted to know what our network wants to be, we want to be collegiate. We want to be smart. We want to steal ideas where they're good, but we really want to create our own brand and we want to control content and we want to do things in a way they have not been done before. The Drake idea, in my mind, is a response to programming in the Midwest. We do a lot of things with our friends over in the Mid-American Conference on sportsmanship. We've got exceptions on a number of NCAA rules to work in junior highs and grade schools on sportsmanship initiatives. I can conceive of us really getting deeper into our communities on behalf of what's healthy about sports. I don't know if you've read much of the research about young women who play athletics - what their views are - healthy eating habits, healthy body image. I think this is not necessarily about going to the Olympics, though we certainly have a lot of Olympians, it's really about creating a balanced, healthy holistic network that fits well with universities, that resonates well with not only our fan base, but with our alumni and then others who have interest in what is obviously compelling. You know, the football and the basketball, but we'd like to be as healthy as we possibly can be and reflect as well on our universities. When the presidents started considering this idea, they said, how can we be in this business? I said, well, we are in this business, the only difference is we allow other people to massage the brand and create it and use it. I said, if you own it, you won't be as critical of others because you can just look in the mirror and find out who's responsible for it. Once they sort of understood there's a great sense of responsibility that they have, that we have, that Mark has, about properly positioning this. When I say youth sports, I'm not talking AAU, I'm thinking skills, I'm thinking healthy eating, I'm thinking the parts that are the healthiest. If we could be part of some sort of reform movement, great, but I doubt if that will happen.
So we shouldn't be anticipating recruiting shows?
I think you should anticipate recruiting shows within the rules. We'll participate in that. But I think what you won't see is you won't see us on the summer circuit.
With everything you are talking about regarding what the network hopes to be, how will ratings factor into all of this? Is that not the most important thing, or are you willing to maybe put on things that you think are more important?
I think it has to be a balance. Ratings are important. We want it to not only be great at launch, but we want to be better after year one and year two and ratings are part of it with advertising sales. Obviously we're going to forgo certain things on ratings side; we're going to forgo certain things on the sponsorship side. I believe that there's a place for this network, especially in the eight-state community. People in the Midwest, Big Ten sports are a part of the culture. They're more than the sports scene. Big Ten universities are, I think, the foundation of the industrial Midwest in many ways. They've been educating people for more than generations. The sports thing has been around the Big Ten for 112 years. I think it's very deep inside the soil. I don't have any reservations about this having sufficient appeal to contribute to the network. Could ESPN do it? Could CBS do it? No, they couldn't do it. They're driven by other factors, narrower factors. We are responding to Big Ten university presidents, Big Ten boards of trustees, Big Ten fans. That's different than having to respond to stockholders. We have to be in alignment with the interests and tastes of the universities. We're in a competitive environment. Our events need to be compelling, I think they will be. Anybody who goes to the first three football games that are televised on this network, I think Ohio State's playing in a game, Penn State and Michigan, there will be 330,000 fans in the stands in the stadiums. I think we have fan appeal. Obviously there's more fan appeal in certain places than in others. We have that compelling programming in our content. We own the network and that allows us to expand the brand and expose athletes and teams of excellence, and I think it will be very successful.
How much have you talked about original programming in terms of what athletes' dorm rooms look like, things like that?
I do see that again. You know, the production people and Mark, we're going to have on July 30, we're going to open the network, hopefully our studios will be complete by July 15th, and so everybody who's in town for the Kickoff Luncheon can come over and we will set up opportunities to interview and discuss in-depth that kind of thing. I know that I've been involved in some conversations. A lot of it has to do with access. I think that our schools will be accessible. It gives us a chance to look and go a little deeper than maybe others have. We have over 5,000 hours available for programming. I think the biggest untold story is the story behind the 8,500 male and female athletes who compete in the Big Ten, and I'm hopeful that we'll have in the can a small cameo on every athlete, whether it's 15 seconds or 2 minutes or 15 minutes that tells a little bit about their story, how they got where they are, what they're studying, what they intend to do. Is it a story about winning national championships? Yes it is. It's competing for conference championships being the Jesse Owens or Suzy Favor Athlete of the Year, but it's also about the walk-on and it's also about the starting of a club team that moved into varsity status and eventually became a national contender. There are a lot of stories here, and I think our job is to be creative and bring those stories into the public consciousness.
Statement on Distribution
Let me just say a couple preliminary words about distribution. When we announced the network a year ago, I didn't know we would have the announcement today of the magnitude we have. But I did know, having not been through this before, I had read enough about it, but I knew that distribution would be an issue on June 21. But, I really didn't expect, based on history and looking at these other networks that have come into their own, I call them independent networks - I'm not talking about networks that are owned by cable distribution companies, I'm talking about an independent like ourselves. I was told by all the experts, all of the advisors not to expect any major distribution deals on June 21 or really even on July 15, that if they were to happen, they would happen later in the summer, that they would happen maybe after the launch. I really didn't expect to be saying too much about it other than we are sort of about where we thought we would be. Having said that, we have entered into 40 or so smaller distribution deals. We have a nice one with Buckeye Cable and obviously we have the DirecTV agreement that takes the games and the events to some 15 or 16 million. When I look back at the history of other networks, whether it's ESPN or ESPN2, even the NFL Network, CSTV, at their launch, all of them were all smaller than we were at June 21.
I was interested, honestly, to read comments in the New York Times on Monday made by a senior Comcast executive. Some of those comments quite honestly bothered me. In particular, the comments about the Iowa women's volleyball team and about the second-tier nature of the games and the narrow interest that Comcast might have in our network, and quite honestly, I don't know how those remarks go on the East Coast, but in the Midwest, when you're talking about women's sports teams, you talk about them with respect; they're not second-tier. Certainly, games at Michigan, Penn State and Ohio State, I don't care who the opponent is, they're not second-tier games. So, to the extent that those remarks were intended to denigrate institutions or teams, in particular the women's volleyball team at Iowa, I think they ought to be rethought. I think if clarifications are necessary, then that's fine, and really, if they were intended to denigrate, there ought to be an apology. That's how I feel about it. I needed to get that off my chest because the facts are important, the rate is important, the method of distribution is important. But I think denigrating teams, universities, volleyball teams, calling people second-rate or second-tier is not the way to move forward in discussions. Some of our discussions with some of our cable distributors are difficult and they're private. Some will be public and they will be equally difficult. But I don't think there's need to put anybody down, any team down, any university down or any game down. They'll have a fair opportunity to negotiate with the Big Ten Network, and I don't need to say anything more about that, but it was on my mind, so I need to say it.
Comcast is an important and powerful cable distributor that I have a lot of respect for. In fact, I am a Comcast customer; I bought the triple play, so that's how I get my signal. I watch many of the networks that they own on my cable system. I understand their partnership in Chicago with the pro sports teams, I understand their partnership with the Mets, and I understand their partnership with the Trailblazers out on the West Coast. I understand their partnership with a variety of other pro sports teams in the Midwest, so I get it.
Not only that, but they have the largest contingent of cable subscribers in the Midwest with 5.6 million, and they are in five of the eight states that are important to us and they touch eight of our universities - so I know when I speak that the comments might not be well-received, but they need to be made, regardless of the fact that they're that important to us. I will also let you know that we have what I think is compelling content, and I also think we have demand. I think we have demand that are Comcast customers. To put those 5.6 million customers of theirs in perspective that live in those five states and touch eight of our universities, well over two million of those 5.6 million are Big Ten alums. And I don't think it's a stretch to believe that as many as three or four million total, in addition to the two that we have as alumni, have an interest in Big Ten sports. I don't think that this is a niche network. I don't think it's by any stretch of the imagination a niche network.
When I was looking at that article in the New York Times and I was looking at some of the other "fact sheets", I put quotes around fact sheets, and I was trying to understand it, and an acronym struck me, and the acronym is CON. C stands for content. We own it. It's ours. We could have sold it to Comcast or we could have sold it to ESPN, but our presidents decided to maintain control over our content. And then O - ownership. We own the network. Now, perhaps if they owned the network, we would be getting a different treatment, but we own the network now. And then N was negotiation. They're negotiating publicly. I was taught a long time ago, 40 years ago, in college by Larry Brown and Dean Smith, two pretty good basketball coaches, to respect all opponents, and I guess in this negotiation, Comcast is an opponent. Respect, but not fear them and that's why when it comes to characterizing teams, selections, universities, women's teams or men's teams, I'm going to speak up on our behalf and I'm going to ask our fans and our alumni base to also be supportive of those teams - those female teams, those male teams, those coaches. I would say this, I hope very much that Comcast comes on board as a partner of ours, and I hope others do as well. And we can negotiate in private or we can negotiate in public. But, if I read again about the second-rate, second-tier women's volleyball team from Iowa as the centerpiece of our programming, I'm going to say the same thing that I'm saying now, and that is that I think it's inappropriate.
One other comment on rate. There's a lot out there that wasn't out there five days ago, but it's out there now. I like facts and figures, but it's nice if the facts and figures are accurate. ESPN is a very important network. It's part of American sports culture and they demand a rate on a national basis of $3 or more and they do it in all 88 million cable homes and they deserve it and I think I would pay it really without asking. The point is, in our region, in our eight-state region, our ask is about one-third of that, in our eight-state region. But, if you took our ask throughout the United States - in our region and outside our region - our ask is less than one-tenth of their ask. I think that needs to be put into some sort of context. Likewise, all of the Comcast networks in region, whether they be in Philadelphia or Chicago or Detroit, have a rate in play when compared to our rate, inside of our region, that is three times as large as our rate. I've seen a lot of these comparisons and I think it's important because the rate we ask is a significant rate and demonstrates a value proposition inside the Midwest that is significant and I don't deny that. But, when I read of the comparisons where they compare our rate in our region against somebody else's national rate or they don't explain that we're looking for a dime in the other 42 states, or they say we are the second-highest national sports rate, when really the average rate for somebody like Comcast is 31 cents across their 20 million homes. The record simply has to be balanced, has to be accurate. There are a lot of ways to look at this, but what I've been reading lately is not in conformity with what I understand our position to be.
So with respect to carriage, we expect to be carried on the basic distribution systems among cable and satellite partners in the Midwest. Externally, we understand that we're not as strong in those areas, both with regard to distribution and with regard to rate, and I think reasonable in those areas. To me it's about who's content is it, who owns the network, and the fact that we're in negotiation. I don't think that our schools want to engage in a public display of negotiation, but I will tell you this, that as commissioner of those 11 schools, and I know where it came from and I know where it's going. I'm not going sit and listen and read facts that aren't accurate, nor will I listen to characterizations of our teams, whether it is Michigan football team, Penn State football or the Iowa women's volleyball team as second-tier, second-rate or however they want to characterize it. So, let me stop there, I probably said plenty.
If you do not get an apology will that affect anything?
Calling them second-tier, second-rate, off-Broadway games is disparaging. Is it a negotiating ploy? Sure. When you want to talk about the women's volleyball team at Iowa, I don't think that's appropriate. Maybe in certain parts of the country it goes well, but it doesn't go well with me.
And also, with Time Warner and some of the other major distributors, are you getting a sense that they're more open to meeting your asking price?
If the negotiations are private for them, they're private for me. If the negotiations are public for them, they're public for me. You guys have been around the Big Ten for a long time, we've done a lot of deals with CBS, ABC and ESPN, and FOX, and you never heard one word, negative or positive. Some of the deals went well; some of the deals didn't go well. We just don't do it.
Speak a little bit to the issue of trying to negotiate with these cable carriers. Are there some legal rules from the Big Ten in terms of perhaps negotiating a system whereby you would go on a digital sports tier or a regular sports tier? Or are you particularly wedded to being on basic cable?
We're wedded to basic cable in our region. Let me give you an example. Do you know what the Mountain Network is? Do you know who owns it? Comcast. And do you know that it's on basic cable in Salt Lake City? We have over two-million alumni in the five million-plus Comcast footprint, and I daresay that if we did a little market study, we could find an additional two million Big Ten fans, fans with intense Big Ten interest. I really don't think that the size of the market, when you think of the branding of these universities, when you look at the, what I call integrated rivalries and integrated markets. You tell me, are the people in Wisconsin interested in Michigan football that's on TV? Are people in Indianapolis interested in Purdue? Is Purdue interested in Northwestern? I found it remarkable, I grew up in the East, where college football doesn't resonate at all, and I've grown up in the ACC where basketball resonates quite a bit. I've never been in a place where cities and communities talk to each other about the rivalries that exist. And I'll tell you, I think that's true between the Bears and the Packers, and the Lions and the Bears. I think the Wolverines talk to Spartans and Spartans talk to Hoosiers and Hoosiers talk to Wildcats and on and on. I think there's an intense amount of interest there for this. The content is the content, that's the supply, and the demand is the consumer, and then we're providing the technology and the wherewithal. It's really not about what I want or they want; I really do believe that at the end of the day, the Big Ten fan, the Michigan fan, the Michigan State fan will demand it.
How did you react to (ESPN/ABC sports president) George Bodenheimer's statements regarding the Big Ten "competing with the hand that feeds them"?
I reacted very well to that. George is a good friend of mine and I read the full context of what he had to say, and I thought it was a good comment. He said they're good partners, he said they're in competition, which we are, and the reality is we're competitors and we are in the marketplace, and in fact we are competitors with them. Biting the hand that feeds them, I don't know, I could say they're maybe biting the hand that feeds them. The content is what makes ESPN special and they've got very good Big Ten content. I know George very well, I know what his intentions are. I considered that to be a good-spirited remark, and most people who know me know that I don't really get bothered by too many comments. I roll with the punches.
How easy was it to broker a deal with the AT&T Universal platform?
I wasn't involved in that negotiation. To be honest with you, I'm not involved in these negotiations.
Jim, I was wondering if you are seeing similar reluctance from the other major cable providers regarding basic cable versus digital or some kind of premium channel? Are they all reluctant at least at this point to look at that and I am talking about Mediacom mostly?
The first thing I would say is this: These negotiations are difficult, and I did not expect, nor is the history of these things that they happen 70 days out. Beyond that, as long as a negotiation is private, it's private to me. And I just don't feel comfortable characterizing. We have deals with a lot of small carriers, we have DirecTV, we have Buckeye Cable, we've had some very good discussions with a number of people, we've had difficult discussions with some people as well. My expectation is that we'll keep trying to work with them and negotiate with them and bring it to a place where everyone's comfortable.
Should fans in various markets like Des Moines be patient and should they believe at least eventually this deal is going to get done so it's on basic? I guess what I am asking is, is it likely that at launch there will be a lot fewer online than there will be lets say by the middle of the season?
I think we'll make some progress. I will tell you that I will be before this group and a group six times larger than this on August 1 with our coaches, and we'll have a better idea of what we have. I think people should be aware, I think they should be extremely curious, I think they should call and ask, and I would say they can demand it if they want to demand. If they want to demand, that's fine, but each consumer has to do what each consumer needs to do. If they're inactive, I would say it sends a message of their interest. And I would tell on that on August 1 or shortly thereafter, if we don't have progress in certain markets, I think the coaches and other people including myself will say, your option is to switch. But, I don't think we're there yet. I don't think we should be negotiating in that way now. But I will tell you that if we get 30-40 days out, I'm incredibly proud to serve these universities and work with the teams and the coaches. It's really a tremendous privilege, and all of a sudden I'm feeling even more the commissioner of all the people, which I wasn't really hired for, but I understand how important these teams are to the people. And I know by virtue of blogs and by virtue of the telephone calls and interest, and that's why it was bothersome to me to see these teams and players and coaches characterized the way they were for some guidance. My guidance would be: call, demand, there is an alternative, ultimately, and on August 1 or in early August, I think we'll have much better guidance for them.
Jim, I just wonder if you can maybe run down some of the big providers in the state of Michigan nearby. Charter, obviously we know where Comcast is. Is Dish also on Board? No. That's still pending?
No, they're not. The largest cable is the Buckeye Cable system, I think that's 150,000, and we have 40-50, I don't know if we have signed deals, but we have 40-50 agreements. We're having good discussions with a number of people; I think that's probably the most important thing. We're talking to satellite providers; we've got an AT&T agreement. Our people are very active and it's a daily process that we're going through and it's public now, at least in this one area. I told our presidents that we're not looking in any way shape or form for a public fight, but I'm not going to have the network, our universities, our teams or athletes mischaracterized in a public way during a negotiation without responding at the time that it happens.
Why were you able to get a deal so quickly with Direct TV?
I think DirecTV saw value. There are a lot of games going on, and by that I mean a lot of competitive games. There are games between satellite and cable, and there's the game between cable and cable, and there's games going on between ESPN and other networks. The simple way to understand this is, I think about it is content - we own it. Ownership - we own it, and the negotiation. In that context, I think it would have to be highly related to the competition that exists between DirecTV as a satellite provider and a premium sports provider, and major cable systems.
What's the rate with Direct TV? What about Comcast if they're making this public can you tell us how far apart you might be?
Is it a lot?
A little? Somewhere in between?
I'm not going to characterize it. I'm just going to comment on basically, to me, enough has been said. I said my piece. I think they made their point, and to me, the issue of the business, and I don't know how many cable providers, probably small ones, there are maybe 80 or 100, and large ones, there's maybe six, Comcast and probably Time Warner are the two biggest, but there are a lot of other players. The negotiations are always delicate and usually they're private, but they can become public. It wasn't our goal to see the public, and as far as I'm concerned, I've said what I have to say about it.
As far as Comcast goes, because of what's transpired and some of the comments that were made in the New York Times, are you sort of setting this August 1st deadline to sort of get their attention?
Tom (Witowsky of the Des Moines Register) asked me what guidance would you give, and I was trying to think through it. I would expect some progress between now and then. I would hope there would be progress, and if there's not some progress, because he was asking me about the fans in Des Moines. And I was saying, okay, as I think it through this, I know we're going to have 300 media in Chicago, I know our coaches are going to be asking me, what the message should be. And my answer will be, well, we've been working hard and we're close or we're not close and they're public or they're not public, and obviously they want to see the Big Ten Network, they've got huge fan followings, and they're going to want to help. I think I would say at that point, no, we're not close, you need to start making other plans, or, we are close, we're moving toward some sort of resolution to this stuff and then do what you want to do. Use your own judgment. But, to the extent that someone asks me, I'm going to say June 21 is not the time to be jumping off the bridge. As these things go, I'll have more to say in August, and the message at that point depends on where we are.
When Mark Silverman was at Purdue... I know he went to all of the campuses but when he was at Purdue I want to say a little over a month ago, maybe six weeks ago, he said at that time he had agreements with about 30 local cable companies and now today you are saying 40. I am not doubting you, but what's holding up announcing them publicly?
I think it's between the time you have an agreement and the time you have an announcement of a signed agreement. It's just how those things go, I think he was just giving an indication of agreements they had, but probably wouldn't make any announcements until they had legally binding agreements. When we announced the Big Ten Network, we had a terms sheet, but it wasn't until four or five months later that we had the full document. Sometimes you just have to make judgments about what you have and when you want to make the announcements. I don't know that there's any strategic reason behind that.
You mentioned strategic reasons... it would seem that if you do have these agreements, I understand you have to get the lawyers involved and they have to check things off, but don't you want to get them out there as quickly as possible because then, I don't know, if pressure is the right word?
There's enough pressure there, but what those deals do is they really confirm the rate, and they confirm, because these people are paying what you're asking for, and they confirm the carriage. They're all basic and they're all at the rate we're asking for. That's why they're good, but I can't tell you other than there's maybe a legal side to it, so I don't know the answer to that question, so I won't try to answer it.
Are they paying the $1.10 that you're asking for?
Just to make sure and clarify they've all committed to put it on basic cable?
Do you go into this thinking that there might be a situation where you go into a negotiation, but like a lot of negotiations sometimes things get done at the last minute, do you think there is a chance that maybe we'll be talking about Comcast and other major providers two days before you're about to launch?
And we're going to be saying things like "Well we're getting closer but we're not there yet and we may not know until literally minutes before you go on the air?"
Yes. The best guidance of the future is looking at history and if you don't know history you're bound to repeat it. I look at history to guide me, and I know that on June 21, we've got what we have and we've got a bunch of discussions going on and some are more positive than others and one is more public than another. It is what it is, but we're feeling good about the Big Ten Network.
Is there a firm launch date?
There is not. I think Mark and his group will be making an announcement in the next several weeks.
Do you envision one day where the Big Ten Network has everything including the Michigan and Ohio State football game and you don't need ABC and ESPN anymore?
That's an interesting question, but I won't be here for that. And, I think they'll always be competition for those games and the Big Ten Network would have to compete with people in the marketplace. But one thing I can tell you for sure is that I will not be here 10 years from now.
Is there any concern about any potential backlash from the states considering your league represents 10 public institutions, where if say Iowa doesn't have the Big Ten network by the time of its launch that you might have either legislative action or fans might actually come against you?
I hope it's not personal, but I think it's possible. I think there are two possible scenarios that play out. One, is, and let me to go the public university side because I think that's a relevant question that's been raised by Comcast and may be raised by others, and it's a legitimate question. They talk about the nature of these institutions, and I couldn't be prouder of the support that the legislatures over the decades and the governors and the people have provided to create these 10 public gems that are largely responsible for the health and welfare in the Midwest, and Northwestern is a great private institution.
Having said that, I will explain to you that Big Ten intercollegiate athletics operations budgets are virtually devoid of state support. And, to the extent that we've achieved gender equity, to the extent that we have achieved competitiveness on a national level has been by externally generated revenues. We're proud of that. There's an expectation that it be done. Quite honestly, a lot of times we're balancing and juggling a lot of balls. Our choice was, do we hand it to Disney, do we hand it to Comcast, or do we participate and control our content? Again, this goes back to CON. It's our content, we own it, and there's a negotiation going on. In the negotiation, somebody might turn the public nature of these universities against us. I think there are a couple different ways to think about that.
We want basic cable. We think that the dominant position of the alumni base and the fan base is such that they should expect to receive this on basic cable. They've been supporting basic cable since basic cable came into play. In particular, in the Comcast equation, there are millions and millions of Big Ten fans and alumni who already pay the basic cable bill. I think they expect the offering to contain the Big Ten Network. If someone chooses or wants to place this on their a la carte or sports tier, I call that a tax. I call that an a la carte cable tax because I think that the interest we have - it's not a niche network. These universities are not secondary universities. They're not offering a secondary product. Somebody might say, these are public universities, these are sports programs are being supported by taxpayers dollars, but that's not accurate to the extent we've been able to meet the goals and the objectives of the fans for these teams. We've done it through selling programs, radio rights, television rights, building stadiums. So therefore, I think either we hand it to Comcast, hand it to Disney, hand it to FOX. We had some of it, sell some of it, maintain some of it and we're in the process. In fact there's one thing that happened that didn't capture many headlines.
What we hear all the time is, they don't want university presidents and boards of trustees don't want these athletic programs competing with chemistry and with English and with the medical school and with the law school for central administrative funding. And, we do everything under God's creation to try to avoid that proposition, and we've been largely successful. Part of that requires participating in private-sector activity. We're doing that and we're pretty upfront and transparent about that. But the other thing that is out there is that the CIC, which is a committee on institutional cooperation, which is the academic arm of the Big Ten and it also includes the University of Chicago, and it's celebrating its 50th anniversary. And it just did a very interesting deal with Google for the digitization of 10 million of the 75 million collections that exist across all Big Ten libraries. The American public will have access to these collections. Revenues will be generated, and there will be a very public, commercial participation there. Now, it's lower profile but there are more and more and more examples as state funding becomes more limited where you're seeing transfer of technology, licensing, googlization of libraries, and I don't think we're acting in isolation, in fact I think that we're acting in parallel ways as universities to find resources, not rely on taxpayers to achieve some of their objectives. So, if push comes to shove in Iowa or anyplace else, I think what I would say to the Iowa fan is, we did the best we could. If they want to tax you, with a digital or a sports-tier tax, I would suggest you seriously consider where those games are available on a basic cable.
You were citing something from my (New York Times) article the other day about whether Comcast was insulting one college or the other. There is nothing in that story about that. I may have in my questions raised that with you but there is nothing. You will have to check the story again.
There are a couple takeouts, and I'm not sure if it's the second-rate statement or the second-tier statement. And whether or not it was in your article or not, the comment on the Iowa women's volleyball team. Okay, that was in another publication. That's out there.
Do you know how it was calculated that the $1.10 and 0.10 equals the $0.30 average?
If there are 5.5 million subscribers in the eight states, that doesn't count the Adelphia number, which I think is 800,000, and I believe that there are about 20 million total Comcast subscribers out there, and so that leaves about 15 million outside the region. My calculation goes like this, let's see if I can do it in my head. You've got $1.10 at the 5.5 million-home basis, and then outside the region, you have an additional 15 million, roughly, 14 million, 15 million. Of that number 40 percent receive a digital signal, not a tier, but a signal. If you took 40% of 14, which I guess would be 6 million, and you charged them a dime, which is what we did, you have 6 million paying a dime, 5.5 million paying $1.10, and I come up with 31 cents. How does that sound to you? Think about it, what you've got is, well, I can't do it on my head, but I've done it on a sheet of paper, that's how I look at it. Comments were made that this is the second-most expensive sports network in the country, and it was coming from a Comcast executive if I'm not mistaken, and I assume the most expensive network is ESPN at $3. In our region, I think it's known that ESPN is at $3. It's known that we're at $1.10, so we're at one-third of that. If I can calculate a number that gets to the advertised cost of a Comcast cable customer at 30 cents, you would agree it's one-tenth what the Comcast ESPN rate is.