The Method To The Madness

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Tuesday night will see the tipoff of a new version of
March Madness, courtesy of a 14-year, $10.8 billion rights deal between Turner
Sports, CBS and the NCAA. It will mean office pool players nationwide can't
wait until Thursday to fill out their brackets for the Men's Division I Men's
Basketball Championship.
Moreover, for the first time in the tournament's 73-year
history, every game will have its own national window, instead of being
presented in CBS's wraparound format. At times, that will put viewers in the
role of director, when they'll have to choose between games airing
simultaneously on the broadcast network, TBS, TNT and TruTV. Indeed, the
expanded 68-team tournament starts with "First Four" games on the latter,
certainly more famous for reality fare like
Hardcore
Pawn and Operation Repo than
sports.
The deal, superseding the final three years of CBS's
11-year, $6 billion pact marks the continued migration of major sports
properties from broadcast to cable, with its dual-revenue stream playbook of
license fees and ad dollars. Facing escalating rights and red ink over the final
years of the deal, CBS needed to find a partner or lose a property it had aired
exclusively for the past 29 years. Come 2016, TBS
will be home to the Elite Eight, Final Four and championship game action before
alternating those marquee matchups annually over the balance of the deal with
CBS. Scheduling aside, the new teammates are also collaborating on production,
melding on-air talent from both rosters and with ad sales, which are at near sell-out
level.  It also figures to cost Turner
affiliates more over the term in increased license fees. 
The architects of the deal, CBS Sports chairman Sean
McManus and David Levy, president of sales, distribution and sports, Turner
Broadcasting System, sat down with Multichannel.com news editor Mike Reynolds after the tourney's
media day in Manhattan on March 8 to discuss the state of televised sports, how
their alma maters, Duke and Syracuse, will fare in this year's Big Dance, and
their unique partnership. An edited transcript follows
:

Multichannel News:
Duke is the defending national champion and fifth in the polls; Syracuse is
11th. What are the prospects for your squads going into the tournament?
Sean McManus:
  I thought better about Duke before Saturday
night with a tough road loss to North Carolina. If they had the freshman, Kyrie
Irving, I'd feel really good about them. They're a question mark, but I am
always optimistic going into the tournament.
David Levy:

Syracuse, the Big East, they just beat up on each other. When Syracuse plays
outside its conference they play actually better because most people don't
understand that zone they play. So they'll go as far as they play away from the
Big East teams and hopefully that'll be drawn by the brackets.

MCN: If you guys
are playing one on one, who's got more game?

Sean McManus David Levy

SM:  What's the sport, basketball?
MCN: I heard
you guys talking about golf, so golf and then we'll talk basketball.
SM:  I think we're pretty evenly matched to be
honest with you, I really do.
DL:  I would say from a golf perspective,
absolutely. We've had some good matches with each other and the good news is,
we enjoy the company.
SM:  I think in basketball if we played 10 times,
it's probably five and five.
DL:
  I accept that answer.
SM:
  We are true partners, as you can tell, on and
off the court.
DL:
  (Laughter) I accept that answer.

MCN: Sean, I guess
you were talking to ESPN about taking the last three years of the [old] deal,
and you gave David a call. Take us
through your thinking, back in the fourth quarter of 2009.

SM:
  It became pretty evident early on in the
process, when the NCAA informed us they were going to start having television
discussions that if we were going to be competitive, we needed a partner to bid
with us.
The first call that I made was to David. We had a meeting
shortly after and came up with a plan that really is what you see today on
television about combining the sales teams, the production teams, the announcer
teams, the branding and marketing.
And the idea that David and I came up with is one the
NCAA liked a lot. That both Time Warner and CBS were going to be promoting
college basketball and the tournament was very appealing to them. And we did a
thorough analysis on our own and then with Turner on the value of the
tournament and came up with a figure that was competitive enough for us to get
the television rights to the tournament with Turner.

MCN:  Was this is all on the back of a napkin,
David?

DL:
You could
say it was, in the sense that what Sean mentioned, what we talked about, really
came to reality. The biggest challenge was not really with the NCAA. The
hardest negotiation was with CBS and Turner. Because when you're trying to put
two large companies together, you tend to negotiation by what things are going
to go wrong, not what's going to go right...
\SM:
  It started in October and culminated
obviously during the first or second week in April [2010]. It was every day of
my life I was dealing with one aspect, whether the CBS aspect or the Turner partnership
or the NCAA negotiation, right through the weekend of The Masters.
DL:
  Sean makes a good point in the sense that
every time something changed in our negotiation, I had to work with CBS, then
Turner, then Time Warner, and then with the NCAA.

MCN: David, you
said you didn't think it was going to happen?

DL:
Well, you
never know what's going to happen. I always felt that the combination of CBS
and Turner was very powerful...but ESPN covers this [college basketball and the
tournament] everyday on SportsCenter and
elsewhere.  But having these two large media companies, like
ourselves, in that negotiation and being a part of it I thought was a very good
combination.  And the fact that we had
the four networks that were fully distributed and the that we could market
ourselves across different platforms like CNN and Cartoon Network and some of
our other brands and with CBS being number one in primetime television and so
forth.. I think that was a very important aspect in what the NCAA was looking
for.

MCN: CBS has had
the last 29 years of the tourney to itself. 
Sean, anything bittersweet going into this?

SM:
I would
not say bittersweet because I am really excited about the programming and
production plans and I do believe that as great a job as I think we did,
switching around and showing all the games on CBS, that this is a better plan
for the viewer. We decided what game you were going to see and if we made a
switch because it was an 18-point game, that's what you lived with. And you
could also watch it online or buy the Direct TV package. But basically, if you
were watching television, we made the decisions for you.
Now the viewer gets to make that decision. Again, this is
going to take some time to get used to it but once the viewer does, I think he
or she is really going to like what he sees.

MCN: David you
said before this is a landmark deal for your company. What about for cable and the
continued migration of big sports properties from broadcast?

DL:
  You know, I know people keep talking about
this movement from broadcast to cable. We looked at this deal as four
distribution platforms -- TBS, TNT, Tru TV and CBS. And ultimately you're
seeing programming, whether it's Conan O'Brian or the NCAA tournament, they're
finding outlets to get to their fans. And this is a way for us to do that.  Our landmark deal is that we've never crowned
a champion on a Turner network and this is something that's very exciting for
us as a company.

MCN: You guys have
already mentioned the cross promotional aspect to both media companies. You
have a Kings of Leon-driven marketing campaign. Is there enough push toward the
first Tuesday night with TruTV?

DukeUNC

DL: That's a
great question. We won't know until Tuesday night. I'm sure Sean and his staff
during the [March 13 tournament] Selection
Show
will talk about the Tuesday night game. Monday is going to be National
Bracket Day, when we'll talk about filling out your brackets, trying to finish
your brackets by 7 [p.m.] Tuesday night. The reality is I think that some people
just won't catch it, but that's what happens over a 14-year deal. At the end,
they will.

MCN: From a
production standpoint, everybody's in the trenches together?

SM:
  Yeah, totally combined. We took the best of
Turner's production and the best of CBS's production and we put them together.
[Turner Sports senior vice president and executive producer] Jeff Behnke and
[CBS Sports vice president of production] Harold Bryant have made every
decision together on the talent, with almost no disagreements. They worked on
the music together, a brand new graphics package that's unique just to this
event.
Jim Nantz can just as easily be on a Turner game as he
can be on a CBS game. And it may very well be on Sunday where he traditionally
has the game leading into 60 Minutes
that ends around 7 or 7:30, he may be on a game that is on Tru at 9 at night on
Sunday night. We've never had primetime basketball on that first Sunday. We do
now.
DL:
  I love it. I don't know of a deeper sports
lineup as far as talent, both studio and over the air, play by play and color,
that is that strong. It's hard to find the B/C team when you go down that list.
SM: I mean
Greg Gumbel is going to be as much as on Turner networks as he is on CBS,
probably more because there are three Turner networks. ...It's a mindset that
takes a while to grasp, if you're talent. But other than the fact that the mic
clips will have "CBS" or "TruTV" or "TBS" or
"TNT" and the lights and the scoreboards, it's really a combined
production. It's one production deal. It really is...
I said before to David it almost seems like we have this
carefully orchestrated PR campaign and that we're one team and everything is
going right and behind the scenes we're beating the crap out of each other.
DL:

We're battling. (Laughter)
SM:
Listen,
we've had disagreements and we've had some questions that David and I have had
to get involved with, absolutely. But the system is that the sales team and the
production team work together. If there is an issue they call David and me and
we get involved but it's been pretty few and far between, I must tell you.
DL:
  And this is unique, there is no question.
This is probably groundbreaking, not just [for the tournament], but probably
landmark for the television business.

MCN: Was this a
choose-up game of announcer talent?

SM:
I mean
each one of the decisions is a no-brainer. Marv Albert calling a basketball
game seems to make some sense to me.

MCN: Kind of
works.

March Madness logo

DL:  Kevin Harlan both calls NBA and college games
[for TNT and CBS].
SM:
  I think Jim [Nantz] and Clark [Kellogg] are
the best at what they do, but to bring in a Steve Kerr, who has a different
perspective. It sounds silly, but I think we had a half an hour call on talent
and it was done.
DL:
It was not
hard. And having really seven or eight guys that can be in both studios; we
have two A studios.

MCN: Much has been
made about pro basketball guys versus college basketball guys. Are hoops hoops?

DL:
  There are tons of differences. But if you
have a love of the game, basketball is basketball. And these guys follow
college and pro. I don't see any concerns at all.

MCN: In the ad
market, the tournament is a virtual sellout.

DL:
  When you do your business models and you lay
out what you think is going to happen. you cross your fingers and you hope that
things work out that way. And I would only say this is that we have surpassed
what we thought we'd be doing in sales in year one already. So it's a good
start to a 14-year deal.
SM:
  I would just add the word 'significantly'
(laughter) because we have. And David is right, if you get off to a good start
in year one, that sets the tone. That is now your benchmark, whether it's 4%,
5%, 8% whatever it is, that's your base. If you are below that base it takes
you a lot of years to catch up. If you're above it, it's a good situation to be
in.

MCN: What if you
don't make your guarantees?

DL:
It'll be
handled within each network and it'll be compensated accordingly.

MCN: As CBS did
with its game coverage all these years, now you're cuming the audience across
four networks.

DL:
  All of our research points that there'll be
more GRPs by the way we're presenting the event this year than there were in
past years.

MCN: Is that a
function, again, of the more windows, the extra games with The First Four. The
primetime games on that first Sunday...

SM:
  I think that's part of it. I think the other
upside is I think CBS has done a really good job at promoting the tournament
for the past 30 years. Time Warner is a pretty big media company. Now all the
sudden you have them reaching an entirely different audience.
DL:
  I'll just add one other thing. Think about
some of these smaller schools that never really got coverage. Those are new
eyeballs coming in we would not have had before because their game is going be
covered on a national basis. I
think you're going to see, from an aggregate basis, more viewers.
SM:
  There are going to be some overnight numbers
available. And the temptation is going to be to look at the CBS number and say,
'Boy in this window, CBS did a 3.4 last year, they did a 2.8, the ratings are
down.' That's an easy thing to do but it's not the way we sold it. We didn't
sell CBS and he didn't sell Turner, we sold everything together.

MCN: Local has
always been a big selling opportunity for CBS affiliates. Does that change, now
with the fewer games?

SM:
  It does affect the dynamic. I mean in the
past, our station in Raleigh knew that they were getting the Duke game or the
North Carolina game. That is going to be different and not as advantageous for
our stations, obviously.  But we had a
choice of finding a partner and programming this in a different way or having
the event go to ESPN. So if you consider the alternative, it's better to have a
part of what we had before. And we still have the Final Four for the next few
years; we still have the championship game.
DL:
From my
perspective, I have to believe our distributors are excited, maybe even
ecstatic. Because think about markets in North Carolina, Virginia, the place
where they can have local avails now on TBS, TNT and TruTV. So I think it's a
big opportunity for them and I think a lot of the cable operators will work in
forming marketing opportunities in the local market. They'll let people know
about TruTV and TBS and TNT having these games.

MCN: Last year,
March Madness on Demand generated some $37 million in ad revenue. Things are trending
up this year?

DL: Just as we
talked about the linear side, the digital side again is ahead, substantially,
of what we anticipated we'd have in year one for March Madness On Demand. All
the money gets pooled in and we both benefit from this, even though MMOD is
being managed from a Turner perspective.
We believe March Madness on Demand has an opportunity to
be a 23-day experience, not just when the games are on experience. And
certainly the iPad and some of these new technologies are going to make this a
lot easier.

MCN:  Are you splitting the tournament money? Or as was first
reported, Turner is shouldering more of the costs, therefore it's getting more
of the revenue?

DL:
  We're really not going to talk about the
financial side of the business, but I will say neither one of us would have
gotten into this deal if we didn't think we were going to both make money.

MCN: Right out of
the gate? [CBS CEO] Les Moonves said that CBS would mak
e money this year.
SM:
  That is correct.
MCN: David?
DL: I'm not
going to talk about financials.
SM:  This is an enormous deal for our
corporations. There is no way either one of us would have ever gotten
permission to do this deal because it made sense for sports. It made sense for
our corporations.

MCN: Will
affiliates pay more going forward, with the tournament on the Turner
properties?
DL:
  We have had a great relationship with our
partners and we've always gotten our fair value for our networks and I believe
we'll get our fair value for our networks again with this tournament.

MCN: Do you want
chalk? UNC, Duke, Syracuse, Kansas, Ohio State making deep tourney runs?
Mid-majors like Butler, George Mason and/or Jimmer Fredette at BYU making
noise?

DL:
  Sean has a lot more experience, but
ultimately brands matter and the bigger brands are going to obviously have
bigger ratings. But as you saw it last year, Butler-Duke, it could happen. And
you can get a big game like that and get a big rating too.
SM:
  We want great stories. I mean obviously the
big national teams like North Carolina and Duke and Kentucky and Kansas, Ohio
State, it helps to have those go deep in the tournament, but I don't think
anybody last year at this time would have said, ‘You know, Butler would be
pretty cool to have in that final four or championship game.' The perfect
scenario is a great Cinderella story versus a national team as in Butler vs.
Duke and when that happens, it's magical.

Syracuse over St. John's

MCN: And this is
going to work out great and...

DL:  Yes it is.
MCN: Which means
you guys are going to work together on the Olympics.  Are Rio [de Janiero, host of the 2016 Summer
Games] and Sochi, [Russia, host of the 2014 Winter Olympics] on your radar
screens? Any interest in college conference rights?

SM:
  All I would say is we are focused entirely on
college basketball right now.
DL:
  I couldn't quite say that.
SM:
  Any other projects will be in the future.
DL:
  Ditto. (Laughter)

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