Carolinas on Their Minds

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Black Entertainment Television chairman Robert Johnson will add a regional sports network to his cable portfolio this October when he launches the Carolinas Sports Entertainment Network (C-SET). Last year, Johnson became the first African-American to own a National Basketball Association franchise when he was awarded the right to form the expansion Charlotte (N.C.) Bobcats team. With the upstart C-SET, he’ll look to repeat the success he enjoyed with BET. Johnson and C-SET executive vice president of media rights and entertainment Naomi Travers sat down with Multichannel News programming editor R. Thomas Umstead to discuss the network’s plans and strategies to serve the vibrant North and South Carolinas region. Johnson also discusses his future with BET, which he launched in 1980 and sold to Viacom Inc. in 2000. An edited transcript of the conversation follows.

MCN: When you were thinking about launching a regional sports network, you obviously looked at the marketplace and saw that Fox Sports Net, and to a certain extent Comcast Corp., were the dominant players. Why did you feel that you could launch your own regional sports network in the very competitive regional sports environment?

JOHNSON: There are several reasons. One, I think it was probably driven by my background and experience in operating a cable network. I felt comfortable with understanding the value of controlling your content and not simply being a content provider to an outside distributor. The second reason is the unique nature of the Carolinas. It’s a tight geographic region. It’s not dominated by any one big city and it is closely linked together by one dominant cable operator, in this case Time Warner Cable.

That made it an attractive model to bring about a regional sports network in a region that could be easily tied together —in a region that, as I said, was not totally dominated by any one particular city.

TRAVERS: I think focusing on the Carolinas gives us an opportunity to distinguish ourselves and differentiate ourselves from the incumbents that you mentioned.

I wouldn’t necessarily characterize them as the dominant programmers when it comes to Carolina sports. Do they exist? Yes. Is one of them carried throughout North and South Carolina? Yes. I think Comcast Sports Southeast is really a southern, southern Carolina network and they really aren’t getting distribution toward the northern part of South Carolina or across North Carolina. But no one is really bringing Carolina sports to consumers the way we will.

MCN: How does ownership of the Bobcats and the Women’s National Basketball Association’s Sting help push the branding and marketing of the network and vice versa?

JOHNSON: When you own the teams and the regional sports network, you can control your own distribution system to leverage your brand in a better way than you would if you simply sold the rights. And we think our brand is not only the network and the two teams but also the fact that we will control a $265 million arena [in downtown Charlotte] for all the entertainment and content that will happen in that place.

Add the fact that we will have merchandising in terms of the Bobcat brand that could be promoted and marketed across the network — and that we would have the ability to tie in our advertisers and sponsors in our arena to our extended distribution over our cable television network — and it creates for me a more strategic position when you are both the content provider and the distributor. In that way, you never let anything get between you and your customer.

MCN: There have been a number of teams that have had the vision that C-SET has for a regional sports network but have failed, mostly because they weren’t able to get significant distribution. C-SET has a leg up because of its carriage deal with Time Warner Cable. But are you concerned about not reaching deals with other operators that will give you distribution across the whole North Carolina-South Carolina area?

JOHNSON: I don’t think so. Clearly within the Time Warner distribution footprint, we’ve got a great asset in having Time Warner totally committed to full distribution. To the extent that the Carolinas see themselves as a regional product and the Bobcats basketball team being the regional team, I think we’re going to get carriage in the other systems.

As we also build in local sports that are close to some of these other markets, I think subscribers across the Carolinas are going to want to see the network.

Plus, this is something that creates a win-win opportunity for both the cable operators and the regional sports network operator because we are locally based. We’re not out of Los Angeles or Philadelphia. We have a clear, local focus.

TRAVERS: I’ve been pretty active in the negotiations, and we are, I think, well on our way to having all the big operators signed up, which would put us just over a million households in time for our October launch. Cable operators are now very actively analyzing how local programming is a premium product, and how it’s being perceived by consumers as a premium product. It makes operators more competitive and gives them a very close connection and tie-in to what’s going on at the community level.

MCN: A lot of people within the regional sports network industry raised their eyebrows when you reached the Time Warner Cable deal, which was a digital-tier deal as opposed to an analog cable agreement. Do you feel setting that precedent will limit your ability to get widespread distribution on other systems in the marketplace?

TRAVERS: You know, digital distribution or digital basic distribution has been part of our strategy from Day 1. And yet we firmly believe that the digital platform is the analog platform of tomorrow. We looked very carefully at who our customer or viewer would be, and it’s a demographic that suggests interest in high-technology features. We feel, for example, that sports programming will be the launch pad for production formats like HDTV. So it made sense for us to be on a digital tier where other technological products are available, like video on demand. I think that this was a very forward-looking strategy.

In the Carolinas, 65% of all new cable subscribers are signing up for digital. Marketing plans and strategies and dollars that operators are spending are for digital platform services. So I think this is part of our strong alliance with operators to drive digital subscriptions.

JOHNSON: I think it becomes a risk if you have a passive operator-content provider relationship. If [the regional sports network] is basically just a signal, the operator will just put it on. At that point, I think you would have some problems if you were on a tier. Time Warner has such a deep footprint in the Carolinas, and they’re committed to making the digital tier a very attractive package as well as a very attractive new source of revenue.

I think the other operators feel the same way — that they’ve got to have compelling content that’s going to drive digital. What could be more compelling than having the exclusive right to the dominant professional basketball team in the region? And if we program the channel right and market it right — and the team performs as we expect it will and becomes a dominant sports product in the marketplace — I think the subscribers are going to move up to the digital basic.

MCN: Just a couple of years ago, the Yankees Entertainment & Sports Network fought a very costly and vocal fight in New York to get distribution on Cablevision Systems Corp.’s basic service because they felt they couldn’t recoup the revenues needed to stay in business through distribution on a digital tier. Are you confident that you’ll be able to generate enough revenue on a digital tier — which may or may not reach 90% or 95% of a system’s subscribers — to maintain the network over the years?

JOHNSON: Yes, I’m confident of that. There’s no reason that I can think of why you would hit a wall in terms of digital penetration if you have compelling content on those digital channels.

TRAVERS: I agree. I think there’s tremendous growth among the digital-subscriber base and growth opportunity, both in new subscriptions and with up sells from converting analog subscribers to the digital basic platform.

In addition to C-SET content in the Carolinas, some of the strongest networks are on the digital-basic platform. So I think there’s tremendous growth written into the existing subscriber base. We’ll ride that wave of growth, and we’ll bring that to our advertisers and our sponsors.

For the right advertiser, this is the exact type of relationship they want, with the exact message, the exact type of programming and the precise type of demographic. There are a lot of advertisers that are focused just on the Carolinas region — quick-service food operators, automobile retailers and distributors. The list goes on and on. Their market fits very well with our distribution territory for the network.

MCN: Is the combination of regional sports and entertainment the prototype for the future of what we now call regional sports networks?

JOHNSON: The asset and brand is better captured when you have a holistic view of why you run and own and operate a sports team and a network. When you’ve got a $265 million downtown arena and celebrities coming there to perform — and if you can find ways to do background footage and get interviews with them and talk to them and make it local, make it relate to what’s happening locally — when you can put all of that into one business enterprise, you become a stronger force, a more integrated force in a community or in a region than you’d ever be if you simply said to somebody, “Here, take 30 of my games, put them on,” and that’s it.

MCN: Will you go after rights for other pro teams in the marketplace like the Carolina Hurricanes National Hockey League team or other local college sports rights, and effectively get into a bidding war with a Fox Sports Net South or a Comcast Southeast for regional sports programming?

Johnson: We will go after whatever product will enhance our channel for our customers. If we’re able to get a hold of it, I think it strengthens us. But we’re going to look at everything that we can get our hands on that makes economical sense and creates the kind of value that we want to have for our network.

MCN: But you won’t necessarily enter into a bidding war to obtain those programming?

JOHNSON: No. At this stage of the game, we’re not going to get in a bidding war. But I can make some cases where the money is not as important as the exposure, especially if you’re giving up your rights for one or two appearances. And there are other ways to get many elements of a school’s product without necessarily having to have the games on. But there are plenty of colleges in the Carolinas. I don’t think we’re going to be lacking for access to content.

TRAVERS: I was just mentioning that many of the colleges have already signed deals with us. I just left the board of trustees of [North Carolina Agricultural & Technological State University] in Greensboro where we signed our deal for football and basketball games. But we will have shorter programming for the professional teams in the Carolinas. It comes down to how do we make that shorter programming compelling. It’s the production values and the production quality that you devote to those shows that are really going to determine how well those properties are represented on our network and how that could turn into additional access and additional programming opportunities.

MCN: Bob, what is it about the regional sports business and owning a team that drove you away from the traditional cable network business that you helped build back in the ’80s with the BET?

JOHNSON: When you own a sports team, you create a community brand and a community identity. It’s far more than what happens in the arena, whether you lose a game or not. It’s more than just the advertisers that buy signage in the hall. You become, as I’ve said to the people in Charlotte and throughout Carolina, a custodian of the spirit of the community. You build enthusiasm, you build excitement, and your players’ personality adds to the community if it’s in a positive way. You bring people together.

When you have that power of that brand, you create what I like to call that emotion-engaging experience for people.

If we want to use our regional sports network to promote something positive in the community, we’ve got a place to showcase it. It really justifies for me why you would own a sports team — not just to put people in a hall, let the team play and then let them go home. You own it because you want it to be an integrated part of a community — a symbol of that community.

MCN: At the end of 2005, your contract ends with Viacom Inc. Does this signal that you may not renew your contract and continue your reign with BET?

Johnson: You know, when I sold BET to Viacom [in 2000], I signed a five-year contract to keep working [at BET] for the remainder of that contract, and I intend to do that. At the end of the five years, I will sit down with [Viacom chairman and CEO Sumner Redstone] and tell him what I want to do. And I’m sure that it’ll be a good, positive conversation for both of us, because it’s been that way from the very first time I sold BET to Viacom.

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