Disney TV’s Anne and George Show

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Anne Sweeney and George Bodenheimer hold the keys to The Walt Disney Co.’s TV kingdom. It’s been roughly a year since Disney promoted both Sweeney and Bodenheimer, naming them co-chairs of the company’s Media Networks unit. Sweeney retained responsibility for Disney’s stable of entertainment-oriented cable networks, with the added duty of being named president of Disney-ABC Television, with the ABC Television Network under her wing. Bodenheimer, in turn, remained president of ESPN Inc. and ABC Sports. There’s a lot on the plate for Disney’s cable stable and its corporate sibling ABC. The company is in the midst of negotiations for a number of crucial sports packages, the most looming and critical being rights to National Football League games. Retransmission-consent remains a hot button with cable operators, who are balking at paying TV stations for carriage, which is an option Disney forcefully defends. ESPN is moving forward with its risky strategy of launching original entertainment programming, while a turnaround is trying to be mounted at ABC Family. Sweeney and Bodenheimer recently sat down in New York City with Multichannel News news editor Mike Reynolds, programming editor R. Thomas Umstead and editor at large Linda Moss to talk about their first year running the Disney TV networks together. An edited transcript follows.

MCN: With Bob Iger’s promotion [to CEO of The Walt Disney Co., effective Sept. 30], there hasn’t been very much mention of cable in terms of his plans for the company. What impact is his promotion going to have on your networks, on the cable end of it? And one mention that has been made is of you, Anne, possibly replacing him as president.

ANNE SWEENEY: Bob has been a tremendous advocate for the Media Networks division that George and I run, and has been a firm supporter of many new ideas, and many things that we’ll talk about today, many new products that have been created out of ESPN and CNG [Cable Networks Group]. And certainly his history with the broadcast network has been extremely helpful to me in my new job.

GEORGE BODENHEIMER: His support of our division has been fantastic [and] really emphasizes the right things that come with technology, international development, creativity. Those are the things that Anne and I focus on in our divisions, as well. So it’s really good news for us.

MCN: And again, Anne, you’ve been mentioned as Bob’s possible successor. If nominated, would you accept?

SWEENEY: I’ll tell you very clearly, I feel I have the best job in the company and I truly have the best job of my career.

MCN: George, with Mr. Iger now [promoted], does that give you the ability to now go ahead with plans to develop your NFL package, whether it’s on Sunday and Monday nights, whether it’s ESPN or ABC? Has that been the holdup, waiting for a new person to come in at the top?

BODENHEIMER: Not at all. Bob’s ascension and all the events surrounding naming a CEO had no impact on our negotiations. It’s been business as usual in that respect.

We’ve been negotiating with the NFL, as has been made public, and we’re continuing to do so. And we hope to have a resolution of our packages with NFL shortly. All the efforts around the CEO search had no impact on that.

ON LOOMING RIGHTS DEALS

MCN: You have a window all the way through October. Are you planning to utilize all that time to determine what you want to do with the NFL package? Or will we see a resolution in the near future?

BODENHEIMER: Well, the answer is, I don’t know yet till it’s completed. But my expectation is that it will be completed prior to the exclusive negotiating period in October.

MCN: Last year, the big news was the new contract that ESPN did with the operators, which set lower rate increases on an annual basis. To what extent is that cap on your increases going to impact your negotiations for these big-ticket, very pricey — I don’t have to tell you — sports packages?

BODENHEIMER: We never felt as though we paid exorbitant rights fees for anything. We paid good value for what we received. And we’re running ESPN like anyone runs any business. You’ve got to make an attempt to match your expenses with your revenues. And we’ve never said we have to own everything [at] ESPN. In fact, I believe the ESPN brand is bigger than any one individual sport.

And we will manage our mix of product like any television network going forward. And we’ll do that within the revenue that we generate from our affiliate contracts on our ad revenues. So nothing new on that front.

MCN: Are you confident that you’ll be able to secure the NFL rights this year; Major League Baseball, actually after the end of this year; and hockey, which is out there currently?

BODENHEIMER: I am so confident that we’re going to renew everything we need to, to keep ESPN the No. 1 service in cable. Exactly what that mix will be, will be determined over time. But, right now, every poll we take — whether it’s cable operators themselves or customers, cable subscribers — ranks ESPN No. 1. And I have total confidence that we’re going to retain that No. 1 positioning with our mix of product that we acquire.

MCN: The NFL is on the table now, and this year we’ll also see PGA [Professional Golfers Association], NASCAR, baseball. Is that kind of the pecking order in terms of how you go about the negotiations?

BODENHEIMER: There’s a number of contracts that are not only coming up, but I think what you’re seeing in the rights-fee business — what you’re also seeing in the cable business — people want to be in business with ESPN. And ESPN wants to be in business with the various distributors and rights suppliers. So just no one’s waiting any more just until the midnight hour, so to speak, to talk about doing deals.

You originally saw [National Basketball Association Commissioner] David Stern talk about getting into a conversation with us, and we’re not even 50% of the way through our deal yet. So, between the contracts that are coming up and the conversations people wish to have because they want to be long-term partners with us, we’ve got a lot of negotiating currently under way.

ON POSSIBLE NEW NETS

MCN: Are there any plans for any new networks coming out of the Disney camp in the near future, digital or otherwise?

SWEENEY: George and I spend a lot of time every week brainstorming with each other and with our teams about what’s next — what are people looking for, what are people asking for, what’s the consumer’s experience with everything we see behind us? But, at this moment, there probably isn’t anything to announce.

BODENHEIMER: But the point is, we’re continually analyzing opportunities. That’s what gets our people excited — new-product development using these brands, line extensions, such as ESPNU just two weeks ago. That’s what we do.

MCN: What about a SoapNet2?

SWEENEY: SoapNet is one of the wonder children of our collection of networks. It has had very strong, sturdy growth. Creatively, I think — under Deborah Blackwell’s leadership — it has been fantastic. Just to look, five Daytime Emmy nominations for this very new, midsize service is nothing short of incredible. I would love to believe that there’s room for SoapNet2, 3 and 4. But we haven’t done plans right now that suggest that there is room for that.

MCN: ESPNU was not a typical launch, from an ESPN perspective, in that currently it has two distributors and, from what I understand, around 3 or 4 million households. Are you satisfied with how it launched?

BODENHEIMER: I was happy with the actual launch numbers. We’ll be in 4 million homes later this month. We’ve got active conversations going on. I mean, the power of college sports is really what we’re talking about here.

In fact, last night I was watching the [Atlantic Coast Conference] semifinal game, the North Carolina game, on ESPNU, at home. This is great basketball. I mean, if you look at the 300 events that ESPNU is going to have on, in terms of quality and production quality — which is a point that often times gets overlooked — ESPNU is going be head and shoulders, it’s going to be the head of the class, let us say.

MCN: Do you feel that you’re sort of playing catch up now as other companies have already been out there with college product?

BODENHEIMER: No, no. College sports have been a foundation of ESPN since 1979. I really look at it just as an evolution of what we’ve been doing for 25 years, and continuing our strong relationships. Nobody televises more college athletics than ESPN by a large factor.

MCN: Will we see a consolidation of these college-sports networks down the line? Maybe you’d come in and purchase one of the two that are currently out there.

BODENHEIMER: I haven’t thought about that. We’re very happy with where it is and we’ve got a very good business plan in place to grow it quickly on our own.

ON RETRANSMISSION CONSENT

MCN: My understanding is that most of the retransmission-consent deals expire at the end of this year. Is that your situation? And what are Disney’s plans for retrans this year?

SWEENEY: I don’t think that’s correct, to be honest with you, that they’ll expire at the end of the year.

BODENHEIMER: We are in the middle of a number of long-term deals. We typically stagger our agreements. So we have to find ways to keep Sean Bratches [president of Disney and ESPN Networks Affiliate Sales and Marketing] and Ben Pyne [executive vice president of Disney and ESPN Affiliate Sales and Marketing] busy, so we stagger our agreements. And it seems to be working so far, because they are quite busy. So we’re always in those negotiations, but there’s no big group coming up this year, as your question suggested.

We have opportunities to secure ABC retransmission consent through our distribution of our other services. Or we have always — and we have from day one and always will continue — to make ABC available for a separate, discrete price. And we give the operators their option as to which they would prefer.

MCN: For any of the deals that are up at the end of the year, will you be using retrans to get further carriage for ESPNU?

BODENHEIMER: Yeah, we haven’t linked in any way retransmission consent to any one particular service. What we try to do is Sean and Ben work with the cable operator on what they’re interested in. Maybe Soap, maybe Toon, maybe ESPNU. I mean, that’s part of the beauty of the organization we have set up here. It’s really a service organization to the cable operator. They may have an interest in a particular service, or they might be in a region of the country — for example, ESPN Deportes might work better for an affiliate. So we’re open to a discussion where our company receives compensation for retransmission consent in a variety of ways. So, really, that’s the way the industry — that’s how we look at it, and that’s the way the industry looks at it, as well.

MCN: In the past, Ben Pyne said you’ve sought maybe 70 to 75 cents for ABC stations as stand-alones. Is that the going rate this year?

BODENHEIMER: We don’t disclose our specifics. It’s a product of individual negotiation. But it’s safe to say that if a cable operator wishes to pay a direct fee for ABC, we’ve always had that available and we always will make that available. We think that’s eminently fair.

MCN: Have many opted for that?

BODENHEIMER: Yeah, we have a number.

MCN: Really, who just pay for the stations as a standalone?

SWEENEY: Right.

MCN: Any sense that the climate for that, George or Anne, that that’s changing, [willingness to] pay for carriage?

SWEENEY: I think there are always going to be some who elect to pay, and others who have much broader business with our company and elect to do it in the context of a different kind of deal.

BODENHEIMER: You know, keep in mind, in 1993, when the whole retransmission-consent laws were enacted, the whole notion that broadcasters deserved to be compensated for their signals was put in the law. And the original efforts — as you may recall — were for a specific fee. The cable operators themselves did not like that idea and together, as a service, we came up with an option where we took that compensation in the form of distribution of cable networks. And that’s been working well, we would argue, across the industry now for 12 years.

If there’s a hesitancy to continue with that model, we’re happy, at the cable operators’ option, to go back to the for-pay model. But either way, ABC deserves to be compensated for what it’s producing. We spend how much a year programming ABC?

SWEENEY: Three billion dollars in rights fees and programming costs to program the ABC Television Network.

MCN: But, of course, you know the arguments on the other side: that you’re getting your service carried to areas which wouldn’t be reachable before. That cable operators pay you, they pay copyright fees and that’s how you get reimbursement for them carrying your services. They argue that DBS may be paying you for your stations, but DBS can charge consumers $5 (a month) for those stations, they can’t.

Bodenheimer: Well, but …

MCN: And just to play devil’s advocate, not everyone would say that this system of getting carriage for your services in exchange for your stations being carried has worked. That’s a big sore point with operators who say, 'Well, we didn’t really want to carry SoapNet, or ESPN Classic.’

BODENHEIMER: We recognize there are different points of view in the industry.

MCN: Sure.

BODENHEIMER: But I don’t think it’s fair to say that cable operators don’t derive a large value from carrying the ABC television network on their cable systems.

ON ABC FAMILY

MCN: What’s your assessment of where ABC Family stands now? It’s ironic, looking back, that that network became such a flash-point for criticism of the [Disney CEO Michael] Eisner regime. You brought in a hot-shot programming guy over there, [ABC Family president] Paul Lee.

SWEENEY: I’m very pleased. ABC Family is up 25% with its key demo of 18 to 34s as well as with 18 to 49s over this time last year. And, yes, we brought in a hot-shot programmer in Paul Lee, who has built a great team with Kate Juergens [ABC Family senior vice president of series, programming and development] leading programming. They have done a wonderful job of realigning the network, identifying the position of 18-to-34s.

Paul has announced that he has two scripted series that are going to air this year, in Wildfire and Beautiful People. He’s produced a number of movies that have done well. They’ve done a lot with their on-air look to really start to target that 18-to-34 [demographic], and some very smart acquisitions. One was The Gilmore Girls. But certainly the addition of Smallville was a very good move to start to set the table for primetime, and start to set the table to bring original programming into prime.

MCN: Drew Carey’s Whose Line Is It Anyway? is kind of a staple on there. Do you anticipate some of the ABC shows to which you have rights — that Touchstone [Television] made, or whomever — drifting over there?

SWEENEY: No. In the early days, the conversation was predominantly about re-purposing. For the right show, it’s a great idea. But beyond Whose Line, you know, ABC Family is more focused on creating its own original programming, which really will, I think, set the tone of the entire service.

MCN: We’ve got a number of preschool networks coming in the marketplace. Is there a concern that some of your share will be taken away from the new network for Comcast? Cartoon Network is getting involved in it, as well. Is there a concern that that [preschool] marketplace now becomes crowded? And are you planning to do anything to change what you’re doing over at “Playhouse Disney?”

SWEENEY: No. I think that [Disney Channel Worldwide president] Rich Ross has done a spectacular job with Disney Channel and Playhouse Disney. And you don’t have to add competition to the marketplace for him to raise his own internal creative bar. And I think you will continue to see new offerings out of Playhouse Disney.

It’s a brand [for which] we’ve done a significant amount of research, not just with kids about Playhouse Disney, but also with their parents and caregivers. And we know how the strength of that brand, we know the high degree of trust that parents and caregivers have in that service, and how much they rely on it.

And we’ve also had a good experience in SVOD with Cablevision [Systems Corp.] with Playhouse Disney. So we’ve even seen, with the new technology, how Playhouse is being used in homes.

MCN: You contemplated doing a 24-hour preschool network, which is what Comcast is doing.

SWEENEY: We did.

MCN: Then you opted against it. Could you go through the thought process of why decided not to take the route that actually Comcast has taken?

SWEENEY: We considered it. We formatted it. We already knew the position of the network, and it would be devoted to preschoolers, their parents and caregivers. And went so far as to announcing that we were doing it. And in the nine to 12 months that we were starting to set up this channel, we started to see things evolve in the marketplace. And we started to pull back and say, 'Well, let’s look at this as a digital-television channel, and does this really make sense? Is this how consumers are always going to use this product coming from our company?’

And we were starting to hear early rumblings of VOD and SVOD. And realizing that with programming for preschoolers you’re very, very limited in the amount of advertising that you could actually bring onto the channel. And then we had an additional concern, which was, how much would parents want to tolerate for preschoolers?

So we scrapped our plans for a full channel, but only in the U.S. And it’s a channel that we have actually put on the air outside of the U.S. It’s a very successful channel currently in the U.K., in Spain, Germany.

MCN: No ads will ever be on the Disney Channel?

SWEENEY: No, no. And I’ve been asked the question for nine years —

BODENHEIMER: A lot of different ways, too.

SWEENEY: … Every year, a couple of times a year.

(laughter)

MCN: At board meetings?

SWEENEY: You know, it’s a very fair question. But again we’ve realized, through a lot of research that we’ve done with parents, that they appreciate the fact that the Disney Channel is an ad-free environment for their kids. And they put high value on that. And that’s something that we have to listen to as programmers.

ON PHONE COMPANIES

MCN: Have you, either on the entertainment-network side or the sports-network side, done any deals yet with the telcos for your video product? And, if not, are you in discussions with them? And what do you think about that as another platform?

BODENHEIMER: We are in discussion with them. And, obviously, as a platform-agnostic distributor of product, the more distributors that are available to distribute our product, the better that is for our business. So I expect over time to see agreements completed with the telcos.

MCN: Do you expect it’s going to be a big business, George? I mean, it’s been stops and starts before. It seems, at least, on the surface level, they’re a little bit more intent this time.

BODENHEIMER: I vividly remember those days 10 years ago or so the first time around with this. So while I think we’ll take a bit of a wait-and-see attitude, it would appear as though it’s a different set of circumstances now, for two reasons. One, that industry is much more consolidated than it was 10 years. And, two, cable operators have made significant inroads into [the telcos’] business with their telephony service. So I think the game has changed. So we expect it to be real.

MCN: George, ESPN is going to get into the pay-per-view business next month with a boxing event. Do you plan to have a number of boxing events on PPV? And, in general, is the PPV business still a viable one for ESPN?

BODENHEIMER: Yes, and we believe so. We’re excited about where we are. And I’m excited about next month’s event. It will be good business for the cable operators, the satellite distributors, and us, and we believe it’s viable.

The advantage we have is we have the ability to market these products to sports fans, as you know. We’re touching 97 million Americans every week with some form of ESPN media.

MCN: How was merging the [ESPN and Disney] affiliate-sales forces? It almost sounds like it would be two different corporate cultures. So how has that worked out?

BODENHEIMER: It’s a great question because — forget about the policies and board structures and exactly how do you do this. Yes, you have to work on all that. But the culture, in our company, is probably the biggest advantage we have going. And there were two distinct cultures, just as there would be any two businesses. And the job that Sean and Ben have done to make a new culture in our affiliate sales group, we’re delighted with the progress that’s been made. There’s a lot going on in that group, a lot of positives.

SWEENEY: As different as the cultures were initially, the one thing they always had in common, they had always both represented strong must-have brands, for The Walt Disney Co. And I think that’s really where they come together. But I have to tell you, we’ve spent a lot of time together and certainly a lot of time with Sean and Ben talking through numerous issues. But I think back to an early meeting I had with Sean in my office, and he’s sitting there telling me, he said, 'Anne, I am so excited about SoapNet. I’ve got to tell you, these SoapNet fans, they’re bigger than sports fans.’ And I thought, whoa, whoa.

MCN: George, how’s HD doing? There are two networks now, right?

BODENHEIMER: Yes. It was so successful with ESPN that we accelerated our plans to launch ESPN2 hi-def. We’ll do over 2,000 events this year, over 6,000 hours. I’m very pleased with where it is. The whole acceleration of high-def sets in the country is growing. I think the number I looked at yesterday was it’s going to be nearly 50 million high-def sets in the United States by 2008. Sales are accelerating.

What seemed like a momentous decision as little as 18 months ago now seems like a no-brainer. If you’re going to be the leader in sports television, you’ve got to produce your product in the highest tech-means available so consumers enjoy them.

MCN: How about Deportes? How many homes are you in?

BODENHEIMER: We launched in systems with about 8 million homes. We’re focusing very heavily on the Hispanic-dominated markets, the Top 10. I’m bullish on it. It’s clearly a business we not only have to be in, we want to be in. We really feel like it’s part of our mandate to serve all the sports fans. And clearly, if you look at the demographics, obviously we need to be there, as think all leading companies are going to have to be there over time.

MCN: I remember talk about Disney doing a Hispanic kids’ service. Is that something you would consider?

SWEENEY: We currently always offer Toon Disney with an SAP feed. But we’re looking very seriously at the Hispanic marketplace and exactly what it is — parents — and kids, want. Is it a mix of English and Spanish in programming? Is it pure Spanish? Because what we’re hearing from a lot of parents is the kids are speaking English all day at school and Spanish when they come home. And the parents are speaking English at work and Spanish at home. So we’re trying to get to the right mix.

But it’s not just about the language. Disney Channel, I think, has done a beautiful job of being reflective of the audience that it serves.

So it’s as much about are you telling stories that are about me and are about all kids. And that really has been a huge focus for them for many years now.

MCN: Would the Spanish-language service be one of the ones you’ve been kicking around on the entertainment side?

SWEENEY: I’d probably say it’s more of a Spanish-language strategy, and what is the best way to implement that.

BODENHEIMER: That’s a focus overall for The Walt Disney Co., not just in the Media Group.

ON ESPN ENTERTAINMENT

MCN: George, are we going to see animated athletic shows on Disney’s various kids’ properties or ESPN? Mark Shapiro [ESPN’s executive president of programming and production] has got lots of ideas.

SWEENEY: We’re actually animating George. [laughter]

BODENHEIMER: That could be an improvement. Given the strength of Disney’s animation legacy, I wouldn’t rule anything out. I just wanted to amplify one point Anne made. We’ve gone so far as to form a new unit at ESPN called the Media Packaging Unit. We’re producing so much content on a daily basis that we’ve got a unit that is charged with looking for ways to take content that may be produced in one medium or network and looking to repackage it, as the name implies, in other mediums.

The best example, in fact, in the top of the first inning, they came up with a hit on ESPN 2’s signature show, Cold Pizza. We had a segment, “1st & 10,” done every morning, hosted by Jay Crawford, with Skip Bayless and Woody Paige. And it was such a popular segment of Cold Pizza, done in thirds, that it’s been repackaged and airs on ESPN at either 4 or 4:30. But it’s helped set the table for ESPN’s primetime.

We now have 1st & 10, a show originally done for ESPN2, leading in to Around the Horn, leading in to Pardon the Interruption, setting the table for SportsCenter, which sets the table for our primetime evening.

MCN: How is the entertainment aspect of ESPN, EOE [ESPN Original Entertainment], performing? Are you satisfied with how Tilt performed, for example, and the movies coming up? And then, what are the plans to expand that service?

BODENHEIMER: Again, here’s another example of something that seemed so earth shattering and momentous 36 months ago that people were questioning our strategy. You know, three years later, I can’t find anybody in the company — or the industry, for that matter — that’s questioning that it was a good idea. It’s broadened our audience, it’s increased our ratings, it’s opened up a whole new level of creative talent looking to ESPN as a place where programming can be produced and aired.

Specifically, Tilt just wrapped up Sunday night, our second series. We had a tremendous success with 3, the Dale Earnhardt film: sold 600,000 DVDs with that, by the way.

And we just announced we’re going to be doing the Roger Bannister film on his record-breaking mile run.

There are 30 made-for-television films in development in the EOE Group. And this strategy is just going to continue to blossom within ESPN.

MCN: Any more scripted programs set up for this, for the next year or so?

BODENHEIMER: We’re looking at a number of concepts, but at the moment, we just completed Tilt, so we’re going to reassess where we are and then move forward.

MCN: Is Tilt going to tilt?

BODENHEIMER: You know, I was happy with Tilt. We raised our ratings significantly in the time slots. I think creatively, it was very well done. High-quality writers. We have to determine where we’re going to go next, but I was very happy with it. The whole poker genre is continuing to flourish on ESPN.

SWEENEY: One nice note to add is that both those scripted shows were produced by Touchstone Television.

MCN: I’ll just finish up with football. Are you guys going to have NFL football on Sunday, Monday, Thursday, and Saturday nights when it’s all said and done?

BODENHEIMER: Well, you know, we love football.

MCN: Aside from ancillary programming, actual games. What’s the game plan? Are you looking at Sunday and Monday to have both on ESPN?

BODENHEIMER: Well, first off, just to repeat what we’ve been saying for months: Our goal is to retain both Monday night and Sunday night and to do that — if we can do that — in a way that makes sense financially.

It is safe to say — to your point, though — that we’re having wide-ranging discussions with the NFL. We’ve been partnered with them for 35 years. And where we come out, we’ll see shortly.

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