He spent a lot to save a lot more
Ted Turner may have just pulled off another one. Contrary to appearances, Turner might not have been taken to the cleaners by baseball's recent super-station agreement. True, Turner will have to pay $30 million over the next five years for the right to carry Braves games into other owners' territories via a satellite hookup with his Atlanta-based TV station, WTBS. But Terrible Ted, one of the shrewdest operators on either side of the Mason-Dixon line, may yet have the last laugh.
Just what was at issue in the baseball deal? Nothing less than the stability of the game, according to new commissioner Peter Ueberroth. Ueberroth had said that superstation invasion of other teams' markets was "tearing baseball apart." The owners blamed WTBS as well as three smaller superstations (which carry Cub, Met and Yankee games) for starting an attendance decline and eating away at local TV revenue.
Certainly Turner isn't ecstatic about the financial terms of the deal. A series of five one-year accords obliges him to pay $6 million per annum in compensation fees, or $230,000 for each of the 25 other teams. Ueberroth also worked out a smaller compensation deal with owner George Steinbrenner of the Yankees, 100 of whose games are televised to a smaller national audience via the WPIX super-station. The Steinbrenner total payment is expected to be less than $200,000 a year. Talks with the Cubs, whose games are aired nationally on WGN, and the Mets, who are on WOR, are continuing.
To put Turner's $30 million bill in perspective, keep in mind that his Turner Broadcasting System, which includes the Braves, the Hawks, WTBS, the Cable News Network and CNN Headline News, made a profit of little more than $7 million last year. Why, then, has Turner reached an accord with Ueberroth?
For one thing, Turner knew that if he didn't pay up, the other club owners would reduce the number of games he could televise. Each Braves game brings Turner $225,000 in ad revenue. A cutback to, say, 100 games from the 143 he now airs would cost him $9.7 million a year—considerably more than he will pay in fees.
Second, Turner effectively gained baseball sanction for WTBS. The owners agreed not to seek restrictions in Congress or the courts. WTBS appears to be here to stay.
In the Turner empire, WTBS is the locomotive that pulls the train. The station's sports and entertainment programs bring in so much money—a profit of $43.3 million in '83—that Turner has been able to spend freely on other projects, like his money-losing cable news enterprises. As for sports, the call letters for WTBS are said to stand for Where The Bidding Starts.
Next month the College Football Association (CFA) will award its Saturday night cable TV rights for '85. "We're going to take a serious swing at it," says Turner. Last year ESPN paid $9.3 million for the CFA. This year, only Turner may know where the bidding will stop. ESPN has to be uneasy. Says its president, Bill Grimes, "Turner was our competitor last time, on the USFL. Since we edged him out for it, I'm sure he'll be more motivated than last time."
That famous "last time," the June '84 bidding on the USFL's three-year cable package, is already the stuff of TV legend. Figuring that ESPN needed pro football for its programming and thus would top virtually any bid. Turner kept raising the ante. When the auction was over, there was blood on the floor—all ESPN's. It paid $70 million for a product probably worth no more than $50 million.
Turner, of course, also pays inflated prices for programming. But he eventually makes the money back. In 1982-83 he forked over the ludicrous sum of $17.6 million for NCAA prime-time football, and promptly lost $11 million. His current $20 million, two-year deal with the NBA will be about a $1.5 million loser this year. Turner buys these "loss leaders" for WTBS to make his station more appealing overall.
"Sometimes you've got very close to a championship schedule," Turner says, "so you pay more for programming that you feel is very important to you from a visibility or promotional standpoint." Here's how the circle works. Let's say Turner pays $15 million for the CFA. This brings more people to the set, which enables him to rake in more ad dollars. That means a bigger profit on all those inexpensive reruns. And that allows Turner to pay off the owners and secure his future....
So who said Ted got taken?
ILLUSTRATION
STEVE BRODNER
Turner's $30 million deal will keep his rich cable operation safe.