Online Extra: The Making of ESPN's Baseball Deal
What began with an initial meeting in March, 2003, concluded with a 2:30 a.m. phone call on Sept. 7, placed from Major League Baseball's Park Avenue offices in Manhattan to the Connecticut home of ESPN President George Bodenheimer. "George, it's Bob. It's wrapped up. We have a deal. I guess congratulations are in order, for both of us," the league's president and chief operating officer Robert DuPuy recalls telling Bodenheimer.
The deal was a new eight-year, $2.4 billion agreement between ESPN and MLB, giving the sports network the rights to televise 80 regular-season games a year and allowing it to carry on a tradition of showing baseball that had begun in 1990. As he got the final word in the wee hours, Bodenheimer, who had left the marathon negotiation session at about 7 that night but stayed in touch by cell phone, was preparing for a trip just a few hours later to Hong Kong to celebrate the opening of a new theme park there by ESPN parent, Walt Disney Co. (DIS ). He was glad he would be able tell his boss, new CEO Robert Iger, that ESPN had locked up baseball through 2013.
By the time the press releases announcing the deal were being crafted, it may have seemed simple enough -- just another renewal of a sports TV contract. But in the two-plus years it took to iron out, 50 in-person meetings between baseball and ESPN executives would be held and countless other conference calls made.
"COLD WAR STANDOFF."
The ebbs and flows that characterized the making of this new baseball pact, in which each side gains and loses leverage week to week, offer a telling glimpse into the complexity of today's big-money sports world where competitors, would-be competitors, and new technologies are raising the stakes. "It reminds me of a Cold War standoff," says DuPuy, a lawyer and Vietnam veteran who was MLB Commissioner Bud Selig's lead negotiator assisted by Tim Brosnan, the league's executive vice-president for baseball. "You are always wondering who might push the button first."
While the first meetings to talk about a new contract between ESPN and the league took place in March, 2003, the tone for the entire negotiations was set by Bodenheimer eight months later. During a sports industry gathering held by the MLB at, ironically, DisneyWorld in Orlando, in November, 2003, the ESPN chief told a crowd of 800 people that his networks needed to be "platform agnostic."
Bodenheimer continued: "We need to be in any pipe and on any device." Brosnan remembers Bodenheimer also saying he couldn't be certain about how the media landscape would look in two to three years. At that point, Brosnan knew Bodenheimer had put baseball on notice. The ESPN boss would clearly be looking for expanded distribution for games and that this would be a key negotiating point.
Meetings continued to take place, mostly led by Brosnan, a lawyer and a former pitcher at Georgetown University, and Mark Shapiro, ESPN's programming chief who had proven to be a no-nonsense dealmaker. The next significant development took place when ABC Sports and ESPN decided in the fall of 2004 to pass on renewing either of their existing deals with the National Football League during an exclusive, early-negotiating window offered by the league.
Soon after in November, the NFL agreed to $8 billion in contract extensions with Fox and CBS for six more years, but Bodenheimer decided to wait. What happened as a result is that NBC, which had dropped pro football years before, swooped in and began serious talks with the league, a development that created competition for ESPN and ABC.
In April, NBC announced a deal, said to be worth $600 million, to broadcast games on Sunday nights, ESPN's old spot. In turn, Bodenheimer announced ABC would be dropping Monday Night Football after 35 years and that Monday night games would be shown on ESPN through an eight-year-deal worth $1.1 billion year, nearly twice what ESPN had been paying before.
Clearly, ESPN didn't want to have to pay that much money for football, and, according to some sources, exceeded its very top limit by about $100 million a year. Whether the sky-high price had an impact on Bodenheimer's negotiations with MLB -- with ESPN looking to recoup that $100 million by trimming its baseball offer -- is an open question.
In any case, Shapiro called Brosnan and said he wanted to meet a day ahead of scheduled talks between the full cadre of negotiators from MLB and ESPN. Over fish at the Redeye Grill restaurant in Manhattan, Shapiro said ESPN was going to offer $137 million a year, well below the $196 million a year ESPN was paying in its current six-year deal. Shapiro notes now that the offer was low because ESPN, impatient with the pace of negotiations, was offering to buy much less.
The proposal excluded such ESPN mainstays such as certain rights for Baseball Tonight, the nightly highlight-rich, wrapup program of MLB play. Shapiro remembers Brosnan balking at ESPN's plan to become a "B-partner." Further, Brosnan suggested the offer was an insult and encouraged Shapiro, whom Brosnan considers a friend, not to bring that offer to the table the next day.
But the next day, ESPN made the $137 million-a-year offer, and the meeting was adjourned shortly after by miffed baseball executives. "Believe me, it was a short one," says Brosnan.
HOW THE PUCK BOUNCED.
At about this time, cable operator Comcast (CMCSA ) had begun to ask the league for information about some of its larger game packages, a sign that its CEO Brian Roberts was interested in building a sports network. Executives from Comcast's Outdoor Life Network channel had also begun to make inquiries to the National Hockey League about a games package. ESPN's deal with NHL was up, but the networks still had an option to extend for a year. But hockey's lockout and lost season in 2004 and 2005 had stirred up vitriol within ESPN. Still, it had until midnight on Aug. 17 to make up its mind about hockey.
Word of Comcast's interest evidently leaked out, and Bodenheimer called DuPuy to set up a breakfast. Over eggs at the Ritz Carlton Hotel on Central Park South in Manhattan, Bodenheimer talked about possibly negotiating a deal with an amended offer that would look for more rights. DuPuy said the league would consider it.
Looking to put some pressure on, Bodenheimer told baseball executives that ESPN still hadn't decided on whether to bid for hockey. While DuPuy was attending a team owners meeting in Pasadena, Calif., on Aug. 17, he was on the phone repeatedly with Bodenheimer back East trying to come to terms on a baseball deal ahead of ESPN's midnight deadline for hockey.
But there was no resolution, and a final conversation between DuPuy and Bodenheimer ended abruptly when the ESPN president's cell phone lost its juice as he was driving home through Connecticut. At the same time, ESPN was putting out a press release that Shapiro would be leaving the network as of Oct. 1. The programmer had agreed to take a job with Washington Redskins owner Dan Snyder to help make a run at Six Flags Amusement and turn it into a media empire.
This was big news since Shapiro's future was often a hot topic in sports-media rumor mills. At midnight, after the Shapiro release was out, ESPN passed on hockey. Shapiro assured Bodenheimer that he would stay engaged to get the baseball deal done.
Right in lockstep, Comcast the next day announced it had signed a five-year deal with the NHL to show games on OLN. "This changed the entire dynamic of our talks," says DuPuy. "Comcast knew it could be a viable [sports network] launch if it had both hockey and another major sport." So interest in baseball intensified. "And without hockey, ESPN knew it needed to keep baseball. It needed content."
Maybe so. But ESPN sources say they were just as confident that MLB badly wanted to nail down a deal with the ESPN.
The following Monday, Aug. 22, DuPuy and Brosnan traveled to Comcast's center-city Philadelphia headquarters to meet with a cadre of top executives, including President Stephen Burke. Word of the baseball executives' trip to Philadelphia made its way back to ESPN's Bristol (Conn.) headquarters because calls were placed soon after to set up another round of talks.
MLB deliberately held off ESPN, though, in a tactical move. "We take Comcast seriously, but we have always had competition for rights, between Turner [Broadcasting] and News Corp.'s FSN [Fox Sports Networks]," says Len DeLuca, ESPN senior vice-president for programming who was right next to Shapiro for the two-and-half years of negotiations.
A week before the Labor Day weekend, Bodenheimer made another attempt to get a deal done. Both sides acknowledged that their various executives would be scattered about for the holiday, but could they make a valiant effort starting Tuesday morning, Sept. 6, to hammer out a deal. The added pressure was that Bodenheimer knew he had to be on plane to Hong Kong on that next morning.
GIVE AND GET.
Executives gathered at 10 a.m. at baseball's offices that Tuesday and began to push for a deal. At one point, Robert Bowman, the CEO of MLB Advanced Media, the league's Internet arm, was summoned to Park Avenue from his office downtown to talk about wireless rights ESPN was interested in purchasing. Bowman had resisted giving up more rights, fearing it would hurt the league's own business of distributing games and highlights directly to fans. But DuPuy made it clear to Bowman that wireless rights were key to sealing the deal with ESPN.
By mid-afternoon, it looked like a deal could be reached. For the next 12 hours or so, the details would be hashed out.
The final number would be $297 million a year, a 50% annual increase over ESPN's last deal. Each side, however, say they got a little and gave a little. The league got a huge boost in dollars and was able to continue to use ESPN to give its games broad exposure. MLB also says the deal is a win because it can now offer additional games to at least three other cable outlets, expanded from just one under the old ESPN deal.
What MLB gave up, says DuPuy, was length, for one. It would have rather negotiated a six-year deal rather than one for eight years. It also gave up another night of baseball to ESPN. In addition to its exclusive Sunday night game, ESPN will be able to air games on Monday and Wednesday nights. About 60 games are still available as part of a national package, and talks continue with Comcast, as well as with Turner. The league itself is in the process of trying to create its own baseball cable channel, similar to outlets operated by the National Football League and the National Basketball Assn., which clearly added some tension to the talks.
ESPN receives that additional night of baseball and key wireless rights. For the first time, the ballgame you're watching on ESPN can also be beamed to any of a half-dozen high-tech platforms, including ESPN.com and even a wristwatch. Likewise, ESPN will be able to use game clips on its new Mobile ESPN cell-phone business. Another benefit: ESPN will continue to air the popular "Home Run Derby" before the All-Star Game.
What ESPN gave up, though, was exclusivity to do break-ins during the game of its Baseball Tonight programming. Keeping fans abreast of what's going on elsewhere in the league has been an effective way to keep them from turning the channel to get the scores and highlights from somewhere else. But the league, for the first time, will allow another programmer to create a similar kind of baseball-oriented show to break into games, except from 10 to 11 p.m. and midnight to 1 a.m., exclusive windows that ESPN will continue to keep.
Shortly after Bodenheimer touched down in Hong Kong, the Walt Disney directors, also along for the trip, approved the deal from across the globe. A week later on Sept. 14, a weary Bodenheimer was back in New York to officially announce the agreement along with Commissioner Selig in a conference call with the press.
"We've acquired wide-ranging rights to fuel all the of the multimedia business of ESPN that today number over a dozen and will continue to grow," Bodenheimer said. As if he needed any reminder of what had loomed over the final weeks of ESPN's negotiations, Bodenheimer that night attended a cable industry dinner at the New York Hilton for which he served as co-chairperson. The other chairperson? Comcast CEO Brian Roberts.
By Tom Lowry and Mark Hyman in New York