Hindery Steps to Plate On YES, Industry Issues

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Leo Hindery has worn many hats during his long tenure within the cable industry. In the early and mid-1990s he led the largest MSO, Tele-Communications Inc., which became AT&T Broadband. In the late 1990s, he headed Global Crossings Inc., the worldwide long-distance and Internet-service provider. Now, Hindery is on the programmer's side of the negotiating table as president of Yankees Entertainment and Sports Network, a New York-based startup regional sports network that will distribute some 130 New York
Yankees baseball games, beginning in 2002. Hindery recently sat down with
Multichannel News programming editor R. Thomas Umstead to talk about the challenges and opportunities that face the launch of YES network in a soft advertising marketplace, and some of the issues facing the cable industry. An edited transcript follows.

MCN: Are you confident that you will be able to get the Yankees Entertainment and Sports Network up and running in time?

Hindery:
Yes. The people I've brought on board are very special people; that's one of the reasons I was anxious to get back into the industry on this project. You know, the time frame is really, really short — a 24-hour network in six months or less is a handful.

MCN: How do you remain confident in the face of one of the worst economies we've ever seen, and what will undoubtedly be tough negotiations with operators?

Hindery:
I'm not naive about the complexities of the market and the challenge it poses. You have to have shoulder programming. You have to have affiliate agreements in place. You have to develop ad-sales and media-sales crews together, and you literally have to do everything from getting Xerox machines to hiring auditors. And the market is extremely difficult — but this is very good programming.

MCN: Have you determined what type of programming YES will offer beyond the Yankees games and Nets games, once those rights become available in 2002?

Hindery:
Nothing that we're willing to announce. But it is a regional sports network, and we understand the responsibility in developing that — it's not an entertainment service. We've got a pretty strong idea of what it's going to be, but we're going to wait until the early part of the year to start talking to people specifically about it.

MCN: Have you spoken to cable affiliates yet?

Hindery:
We're doing it now. This is a project that you have to do all concurrently, and we've been in touch with both the cable operators and the advertisers.

MCN: You're going into a marketplace where two pretty expensive regional sports networks already exist. Are you proposing a $2 or more licensing fee?

Hindery:
I'm not going to comment specifically on our rates. I think that there's a range on [regional sports licensing fees] of 85 cents to $2.70, and we feel comfortable with that range. It's not expensive programming, it's more costly programming.

It's more costly for us to acquire the rights, and as a consequence it's more costly to the consumer. But one of the things that people have to acknowledge is that the ratings on these RSN's are often tens of factors more than a lot of other networks on basic cable. [YES] will be priced appropriately and fairly.

MCN: When you were at AT&T Broadband, you questioned whether expensive regional sports services should be on basic. How can you now justify lobbying for basic carriage of a network that as an operator you may have fought against?

Hindery:
First, [regional sports networks] are all on basic. The whole argument about what belongs to the basic is a more expansive one than just sports. It involves everybody, from a new service, to sports services to C-SPAN to USA Network.

One of the challenges of fragmentation is obviously garnering enough share for everybody to have a profitable experience, and I believe most programming belongs on a basic tier.

When I was at TCI, the only point I ever tried to make was that [network-licensing fees] needed to be fair. That didn't mean that it needed to be cheap. I expressed my concern when I thought some of the programming rate increases weren't fair.

But if you recall, I was also the guy who launched Oxygen. I tried to launch an African-American service [New Urban Entertainment TV]. I called in Lifetime [Television] and tore up their contract and paid them more than I had to. I launched The History Channel. I launched C-SPAN across TCI systems. I also tore up the A&E [Network] contract and paid them more than they were entitled to.

I've never been unwilling to pay for good programming. Like anybody else, I don't want to pay too much for less good programming. My issue is that price is fairness and the best measure of fairness is viewership.

MCN: Can you successfully take that message to the New York-area operators?

Hindery:
I think as an individual I've been very consistent in this whole area. I always have been willing, as a cable operator, to pay for quality programming, because the better the programming, the better my relationship with my customers. The only time I was very outspoken was when I thought I was getting gouged — when somebody lost programming and expected me to still pay for it, or expected me to pay automatically for any increases when the underlying quality of the product hadn't improved.

MCN: Having said that, do you th
ink th
at Madison Square Garden Network, now that they've lost the Yankees, should reduce its rate card?

Hindery:
No, I think MSG is a fine service. We're not competing with MSG — we have a service that is preponderantly baseball-oriented. MSG is preponderantly a winter-sport service. Now they do have, through Fox Sports Net, a few combinations. I'm not a competitor of MSG, I'm just an alternative — I think MSG does a great job.

MCN: Any possibility YES could end up on a tier, as some of the operators are suggesting?

Hindery:
I don't think they're suggesting it. I think some of the press, like yourself, are suggesting that. But I think the product belongs on basic. If we can prove to the operators that it's a quality service, then we'll be in good shape.

MCN: New York Yankees owner George Steinbrenner has been known
to call his managers when the team is not playing well. Come February, if YES's cable affiliate deals aren't completed, do you expect him to step into the negotiations?

Hindery:
George and I are friends and it would be inappropriate in that friendship for either of us to try to suggest how either of us should run our business. George has asked me to run this side of his business for him; I'm honored to do it. He's been nothing but supportive, and I think he believes there's some things I do better than he does. I know there are a lot of things he does better than I do.

MCN:
There have been a lot of questions regarding the future of former Turner Sports boss Harvey Schiller, who is rumored to be leaving the YES organization. Has his status caused some problems for you at all?

Hindery:
Not at all. Harvey Schiller, whom I'm a big fan of, was brought in to run YankeeNets, not the YES network. When YankeeNets decided to form the YES network, [YankeeNets] decided to form it away from the company. At the time, the decision was made to go outside, at which time I came into that situation. I'm a big fan of Harvey Schiller, but it became a ship passing in the night, so to speak.

MCN: Yes has been criticized for only selling 20 Yankees games to WCBS-TV, as opposed to 50 that were on Fox's WNYW-TV last year. Your response.

Hindery:
I don't know what the answer is. I know that I spent a lot of time pondering this issue. This is a market that's about 82 percent cable-penetrated, and I think your responsibility in high-penetrated markets are different than in lower-penetrated markets.

We've insisted that the product be made available, so if you're part of that 82 percent of the market, you'll get 162 games on basic — 12 through national telecasts, 20 or so from WCBS and the balance from the network.

So for 82 percent of the market I have, I think, done the right thing. You'd have to then ask yourself, each time, have you done right by the 18 percent of the market that doesn't take cable? And the answer is those people will get 12 through the national feed and 20 games over the air — that's 32 games. That's 20 percent of the schedule, and they'll be very prime games, because that's the nature of those contracts. And one of the things you also have to acknowledge is the people who don't take cable watch television about 31 percent less than people who do have cable.

MCN: Let's shift subjects a bit. AT&T Broadband has had a number of changes over the past couple of weeks, both on the personnel side as well as trying to right its ship financially. What's your take on some of the changes that it made and its future?

Hindery:
Well the only one that I feel qualified to comment on is [AT&T Broadband CEO] William Schleyer, who I think is a superb manager. For the employees of AT&T Broadband and for the customers, I think Bill will be an exceptional steward — he's a proven operator, he's sensitive to his employees and his customers, and I'm delighted to see him in that position.

The board of AT&T and the shareholders will need to decide on a course of ownership, but on the very narrow question of management, going forward, they will do an extraordinary job.

MCN: Do you think that AT&T's Broadband division will be sold or do you think the company will keep it?

Hindery:
I think that the market and the shareholders decide those issues. [Comcast president] Brian Roberts has made a very compelling offer and whenever the market thinks that he's going to win the stock of AT&T goes up, and when it seems he's not going to win, the stocks seem to go down. But it'll be up to the board to reflect on all of that.

MCN: Overall, is the industry pretty healthy, or in for some rough times?

Hindery:
I think the economy as a whole for the U.S. nation is in for a very difficult time. In my opinion, some really wonderful managers run the cable industry, and it offers a lot of counter-cyclical value. That doesn't mean it won't be without some pain and some missed forecasts by us all. But in difficult times it can be argued the cable brings greater value to consumers than in less difficult times. It's a hell of an entertainment value.

MCN: Do you think the cable industry played a positive role during the events and aftermath of Sept. 11, as a newsgathering source or an entertainment outlet for consumers?

Hindery:
Sept. 11 was such a tragedy, but the worth of cable in crisis times has been shown. We've been more informed as a nation and been able to communicate more easily because of cable. I think that the news services and cable services in general have done an extraordinary job during the tragedy.

I told [AOL Time Warner Inc. CEO] Gerald Levin, [News Corp. chairman] Rupert Murdoch, [Viacom Inc. president] Mel Karmazin and others that I've had a chance to chat with that they did an unbelievable job and they should be enormously proud. They sacrificed profitability to inform us.

MCN: You still hold a financial interest in New Urban Entertainment TV: Where does that network stand at this point?

Hindery:
I hope, over time, it makes it. I think it deserves to, and I think it's important for the country, and for the for African-American community in the United States.

But it's tough. [Radio One CEO] Alfred Liggins is really taking the lead oar on this one, and I pray to God he pulls it off. If I lose money on it, I don't care that much because it was worth trying for.

MCN: You don't have any hands-on dealings with it?

Hindery:
No, I don't have any. I didn't really ever want to. I think it's a service for African-Americans by African-Americans. I never wanted to be presumptuous to that process.

MCN: You were very outspoken while you were at AT&T about the need for the industry as a whole to be diverse. Are you looking to pick up that mantle again?

Hindery:
You know I'd like to. But there are some awful nice people that have stood very strong on the issue — [Comcast Cable president] Steve Burke, [Carlsen Research Inc. CEO] Ann Carlsen, [Showtime Networks CEO] Matt Blank, [The Weather Channel president and CEO] Decker Anstrom — and if anybody thinks that I can be helpful, I will be.

I think I'll go to my grave believing that the legacy that's most important about my time in the cable industry was how we did, not what we did. I look at myself in the mirror every day and I ask if everything I've ever done has been as good as it could have been about making sure the industry is diverse.

MCN: A lot of people are wondering what's next for you, that maybe YES is a stepping stone to possibly a move into politics …

Hindery:
No. I spend a lot of time on political issues. I feel very strongly about certain social and political issues that are initiatives that are confronting the country. Everybody who knows me knows that I'm going to work very hard on those areas as well. This is important to me. It's an important way to come back into the industry with people I'm very fond of, doing something that I enjoy a lot. But I also will find the time to be involved in Democratic politics, and social initiatives, like education and diversity — and I'll still find time for racing cars.

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