ESPN

"Next Steve added to the Disney column: PIXAR ONLY ONE HIT “We’ve had only one hit,” Steve said. “Before we prove we can repeat it, Disney might be reluctant to change our deal.” This was the one-hit-wonder problem. One hit did not make for a track record. “Anything else in Disney’s favor?” Steve asked. “We’ve talked about this,” I said, “but maybe Eisner’s interest in animation is waning. He just bet big by buying ABC, which includes ESPN. Animation could be on its way to becoming a sideshow for him.”"

"In a cable television system, the largest category of cost (40 percent of total operating expenses) is the fees paid to programmers (HBO, MTV, ESPN, etc.). Larger cable operators are able to negotiate lower programming costs per subscriber, and the more subscribers a cable company has, the lower its programming cost (and the higher its cash flow) per subscriber. These discounts continue to grow with size, providing powerful scale advantages for the largest players. Thus, the largest player with the lowest programming costs would have a sustainable advantage in making new acquisitions versus smaller players—they would be able to pay more for a cable company and still earn the same or better returns, thereby creating a virtuous cycle of scale that went something like this: if you buy more systems, you lower your programming costs and increase your cash flow, which allows more financial leverage, which can then be used to buy more systems, which further improves your programming costs, and so on ad infinitum. The logic and power of this feedback loop now seems obvious, but no one else at the time pursued scale remotely as aggressively as Malone and TCI."

"JC and I had an early meeting at the convention center, and we walked the show floor before. What we saw opened our sleepy eyes—workers setting up booth after booth for new channels, including HBO, Showtime, ESPN, Nickelodeon, and MTV—more than we had ever seen before and nothing like we had expected. No longer would cable TV be a community antenna service merely bringing in the Big Three broadcast networks (ABC, CBS, and NBC). These companies were coalescing into a completely different business, an unprecedented platform for networks of all kinds: movies, music, news, history, education, food, and so much more. Millions of TV homes in America would want more choice in the channels they watched."

"ESPN, which produced thousands of hours of televised sport, was a key to making Sky’s sports channel work. Although ESPN’s sport was not the most compelling for a New Zealand audience—being mostly US-centric baseball, motor racing and gridiron—a dedicated sports channel soaks up a lot of material. ESPN was the biggest sports network in the United States and Sky needed ESPN’s volume. ESPN knew that too. It was in a position to drive a tough bargain, and it did. Negotiations went on for more than a year, concluding only when Sky agreed to a contract that gave ESPN a minimum of US$1.75 million per annum, paid quarterly in advance with an additional fee of 40c per subscriber per week once subscriptions reached more than 150,000. The contract was for seven years with an annual escalation clause. But the requirement that most staggered Heatley and Jarvis was that ESPN also demanded 5 per cent of their company and a seat on Sky’s board. ESPN was the single toughest company that Sky had to deal with."

"With a staff of 200, all being paid out of shareholders’ funds and bank loans, Sky finally went to air on 18 May 1990. Initially, only Auckland could receive the new service though by August, Waikato and Tauranga households could get it too, and by the end of the year it was available in most of the North Island. For Heatley the launch meant relief rather than euphoria. He, Jarvis and Green had achieved a huge amount. They had done what they had set out to do. They had built a TV network from scratch offering international channels and up-to-date choices that New Zealanders had never before had, but pre-launch subscriber sales had not matched predictions and the drain on shareholder funds was unabated. By the time of the launch Heatley’s shareholding was about 40 per cent of the company and Jarvis’s was 14 per cent, reflecting how much of his own money Heatley had had to put in. TVNZ had about 25 per cent, Gibbs and Farmer’s investment company Tappenden had about 18 per cent and ESPN’s shareholding had been diluted to 1 per cent."

"Sky tried to keep costs down but even without big-name TV stars, which Sky did not need, it was hard. ESPN would send hours of sports programming daily, which Sky had to filter, view, select, edit, package and broadcast to New Zealand viewers, and as soon as it was done they needed to start on the next day. It was labour-intensive work. Sky had only 200 staff to TV3’s 300, and more savings were hard to find. Hardware like antennae and decoders had to be paid for. The advertising budget was high because, without commercials, subscribers were the only source of revenue, so trying to sign them up through advertising campaigns seemed vital. But without change, Sky was unsustainable."

"On 4 June, Heatley wrote to Smith again, this time about the ESPN contract, but the theme was the same and he directly spelled out his concerns and the need for urgent action: ‘I don’t want to harp on about programming issues but the main problem we face is that most sports contracts (rugby, cricket, league, netball etc.) are multi-year deals and even if we decide to get aggressive now, it would be years before we have any significant impact.’[6](private://read/01jectdbce729daxqkxt7cbe8r/#mn29) The company had to lay the foundation for these exclusive deals now rather than keeping the strategy in reserve for when sales stalled, he urged. If Sky was going to get 20,000 subscribers in the next few years, it needed exclusive coverage that people wanted to see, in particular, sport with local teams. But it would be complex and expensive to arrange, so the Americans had to be convinced that it was the right strategy and then commit the time and money to achieving it."

"On signing, Heatley decided to verbally ask for something additional—a favour rather than a condition and personal not business. If he signed the deal, might ESPN somehow arrange for him to play a round at Augusta National Golf Club? He says he was ‘kind of joking but kind of not joking’ when he asked. He thought that if anyone had the contacts to pull it off it would be ESPN, whose people he now knew well and liked. He was certainly not going to approach the club directly even though by then he had been to Augusta three times to watch the Masters—a small perk of Sky’s contract with the prestigious golf club. He did not have the right contacts and, anyway, by reputation Augusta was one of those clubs where if you asked to join you would never become a member. Perhaps, similarly, if you asked to play you would never get the chance. But asking ESPN was different. ESPN was hugely influential, he was a client and even if he was rebuffed it was worth trying because if he never tried, it would certainly never happen."

"McCaw's empire building had begun, though no one at Stanford had any inkling of this side of his life. McCaw quietly ran his business by long-distance telephone, calling managers in Centralia and checking with Marion on estate litigation and creditor negotiations. His penchant for secrecy would ultimately become a tremendous business asset. "He put a helluva mask on," says Fred Morck. Jeff Ruhe was a close friend at Stanford but always knew that McCaw maintained a private zone. "He's a great listener," says Ruhe, who later became an executive with the ESPN sports network and is still a friend of McCaw's. "He doesn't give away much, but he takes in a lot.""