THE CLEANUP HITTERS
We made the judgment that several sports properties might make an immediate impact on prime time and help turn CBS around. It may work, it may not. Sports acquisitions are just one of the layers of strategy in this company.
Neal Pilson
President, CBS Sports
Well, reduced to cold Corporatespeak, it all sounds pretty matter-of-fact. But the truth is, Pilson is describing something pretty damned exciting, something even a bit historic. For at no time in the annals of television has so much money been spent ($3.5 billion) so fast to buy so much "property"—in this case an array of sporting jewels that includes over-the-air network TV rights to four baseball regular seasons, A four All-Star Games, four baseball playoff series in each major league, four World Series, two Olympic Games, four NFC regular seasons, four NFC playoff series, one Super Bowl, one Masters golf tournament and seven 32-game NCAA basketball tournaments. To the big spenders at CBS, this blast of billions may have been nothing more than a "layer of strategy." But to the rest of the TV sports world, and to fans in general, it was a volcanic, not to say vulgar, spewing of riches that left Pilson's rivals awed, angry, envious—and helpless.
Indeed, at one point during CBS's 15-month-long attack of the moneybags, NBC Sports president Arthur Watson gasped, "They've got to be out of their minds." And Dennis Swanson, president of ABC Sports, which used to be the most profligate of all the network sports divisions, simply shook his head and said, "We're not the government. Maybe this fits CBS's strategy, but we have our own shareholders to answer to, and we can't justify losing money week after week on anything."
Untroubled by such scoffing, Pilson crows, "We're in as dominant a position as a sports network as anyone has ever been. There has never been a period when there were so many properties for sale that all had to be negotiated in such a brief time [December 1988 to March '90]. We won a few and we lost a few, but we got everything we really wanted."
At enormous risk, he might have added. The future of CBS may be at stake in this decision to use sports as a springboard to ratings supremacy in prime time. But it was a gamble that the network's CEO, Laurence Tisch, and Pilson made with enthusiasm. And they did it despite the fact that as recently as five years ago Pilson was prophesying doom and gloom if networks didn't rein in their spending for sports. "Times change," he says now.
So who is this guy who rose out of the pack of network yes-men and yuppies to become the No. 1 impresario of TV sports in America? Well, what do you visualize when you think of a TV impresario? A colorful high roller, confidant to jocks and talk-show hosts, companion to congressmen and beauty queens, conspicuous user of limousines? You do? Well, forget it.
This czar of TV sports is none of the above. He is a steady, abstemious, bespectacled 50-year-old with a Yale Law degree and a pharmacist's name: Neal Pilson. Smart, articulate and icily logical, he is so coolly dispassionate that he effectively fired his star announcer, Brent Musburger, at 2:30 in the morning the day before Musburger was to have worked the NCAA championship basketball game. Pilson subsists on a low-cholesterol diet and finds he must keep an eye on his anxiety levels. He says, "You have to be able to step away from yourself during intense negotiations and say to yourself, O.K., now, Neal, you know why you're not eating, not sleeping, not conducting any kind of sensible conversation with your wife? It's because you're taking your business everywhere you go—to the shower, on vacation. But that's the way you are, Neal, so don't worry about it. Just keep an eye on what's next."
Whatever is next, it always adds up to a 75-hour work week for Pilson. And in the deluge of detail and decision-making he faces each day, he has come to believe that corporate mankind's most important attribute is "the ability to prioritize." After a day of high-tension prioritizing in his 30th-floor office at Black Rock, CBS's Manhattan skyscraper, he heads straight home to the suburb of Chappaqua, N.Y., where he dines with Frieda, his wife of 28 years, does more CBS Sports work and retires by 11 p.m.
He doesn't drink, and he is on the road about 170 days a year. One of the secrets of his success, he says, is that "I really know how to travel. I am always at the airport at least an hour early because I want to avoid unnecessary, stressful situations. If I do encounter a delay, I always carry a little portable office kit with a dictating machine, cellular phone, stapler, staple remover, ruler, calculator, Scotch tape and paper clips. Not long ago, I was delayed at the Kansas City airport for four hours. I did two months of expense accounts."
When friends or associates are asked if Pilson has any consuming hobbies, they pause for a while, then report that he is a wizard at using the Airline Travel Guide to decipher the fastest routes between cities and that he can recite from memory all of the quickest routes into town from every major airport in America. He has always been an enthusiastic though mediocre athlete. He played junior varsity basketball at Hamilton College in Clinton, N.Y., as well as recreational softball and touch football well into his 40's, and he once coached his son's peewee hockey team. He is now trying to polish his tennis and golf games, though it's a struggle.
But what Neal Pilson lacks in expertise on playing fields, he has in spades in the executive suites of the media game—and nowhere is that game harder to play than at CBS. In recent years the network has become a strange and bedeviled operation that seems to have lost its cool, along with its prime-time ratings. The network was the object of a Ted Turner takeover bid in 1985 and may yet be a target of Walt Disney Productions or other rumored suitors. Tisch, CBS's majority owner, chose a slash-and-burn defense to discourage takeovers, lopping off some 1,500 staffers in '86 and selling CBS Records, CBS Publishing, CBS Magazines and other assets.
Pilson has been something of a rock amid all this turmoil. He came to CBS from the William Morris Agency as a contract negotiator in 1976 and became president of CBS Sports in '81. And, except for the years '83 to '86, when he was executive vice-president of the CBS Broadcast Group, he has been president ever since. This is a remarkable run, considering that the presidency of CBS Sports was a revolving-door position for several years before his arrival. Howard Stringer, the charming, Welsh-born president of the CBS network, says, "Neal brings a combination of grace and cool and steadiness and reliability to this place where there has been precious little stability in the last few years. He is what I would call a captain of this industry."
Pilson got that way by being a CBS company man first and a builder of sports empires second. Barry Frank, a former ABC Sports vice-president, one of those revolving-door CBS Sports presidents (1976 to '78) and now International Management Group's TV rights superagent, compares Pilson with the original king of network sports: "Roone Arledge's one fault was that he was more interested in ABC Sports than he was in the ABC network. Neal sees his department as fitting into the needs of the whole network and not as a separate powerhouse that he operates by himself."
Pilson says, "Much as I like sports, what engrosses me most is business. It's not the jock part of it that keeps me going, it's the chess play."
Whatever game Pilson is playing, most of his power lies in his money—or, rather, in the $3 billion war chest Tisch has given him. As the boss of what used to be called the Tiffany of TV networks, Tisch, a diminutive, bald billionaire who made his fortune in hotels and movie theaters as the primary owner and CEO of the Loews Corporation, has produced annual operating profits of between $228.6 and $294.6 million since taking control of CBS in 1986. As of last week, CBS stock stood at $204 per share, compared with a pre-Tischian $126. The company's revenue projections for the remainder of the year, however, are said to be gloomy, partly because it may have to begin making good on its huge sports deals in the face of sharply declining ad revenues.
If his record has been good (so far) as a money-maker, Tisch's performance as a television magnate has been inept. To put it bluntly, he has turned Tiffany into K Mart. CBS had been the leader in prime-time ratings from 1970 through '85, when it slipped to second place behind NBC. It has never recovered. In '88, with ABC's prime-time Winter Olympic coverage added to NBC's powerful menu of sitcoms and serials, CBS dropped to No. 3 in prime time for the first time in its history. In last month's sweeps it finished a surprising second to NBC, 11.8 to 11.9. But the CBS Evening News, which for 20 years was an untouchable No. 1 under the benevolent reign of Walter Cronkite, has slipped to second under the erratic rule of Dan Rather, and there remains more than an air of desperation at the network. Thus, the turn to a very unlikely savior: CBS Sports.
Because entertainment and news at CBS were so platinum-plated for so many years, the sports division operated as something of an afterthought. Until the late 1970s, CBS was satisfied to have the NFL, the Masters and the Kentucky Derby for its major events. Then it went after, and got, the rights to the '92 Winter Games in Albertville, France. It was the first time the network had seriously bid on an Olympics since it won the rights to both the Winter and Summer Games of '60. It acquired rights to the NBA in '73, but it had never shown any interest in baseball, college football or NCAA basketball until the '80s. Prime-time sports were unnecessary—indeed unthinkable—for a network that stood No. 1 at night with a wildly varied sitcom diet that ranged from The Beverly Hillbillies and Hee Haw to M*A*S*H and All in the Family.
Before 1980, CBS Sports generally seemed more like a college fraternity house than a place of serious business. This, it must be said, was more or less true of all network sports operations in those unbuttoned, pre-Perrier days; but CBS Sports was a touch more lighthearted than the others. Back then, ABC was first in sports, under the innovative Arledge. Television Age once wrote, "CBS Sports seemed to exist only so that NBC wouldn't be last in everything."
But what a difference a decade or two can make. With NBC No. 1 in prime-time ratings, CBS rules the roost only in sports. It now controls so many events that it expects to air a whopping 53% of network sports programming (bringing in as much as 30% of CBS's overall network revenue) in 1990. NBC is likely to be left with 26% of the sports programming pie and once dominant ABC with just 21%. Indeed, CBS this year possesses the richest trove of big—rilly big, as CBS's Ed Sullivan used to say—sporting events any network ever owned (chart, page 83). We are talking about the crown jewels of sports: As 1990 ends, CBS will have aired the Super Bowl, the Daytona 500, the NCAA basketball tournament, the Masters, the NBA playoffs, the All-Star Game, tennis's U.S. Open, both of baseball's league championship series and the World Series. At CBS, this is known as the Dream Season. Pilson says, "It's never happened before and very likely won't ever happen again."
Yet the fact is, CBS really wouldn't mind if another network had all those big events, so long as CBS had top-rated entertainment shows in prime time. Pilson, Tisch, and his key aide, the senior vice-president of CBS Inc., Jay Kriegel, who some TV analysts believe has been the primary architect of CBS's strategy, would rather be airing The Cosby Show (NBC) and Roseanne (ABC) than the World Series. They might even prefer America's Funniest Home Videos (ABC) to the Final Four.
The reasons for this are simple: A hot prime-time program generates revenue week after week, year after year—as much as $3 million in ad revenues per half-hour show against production costs that average significantly less than $1 million. Because of their enormous rights costs and high production expenses, sporting events are not nearly as profitable.
In the past, other networks have been able to pull themselves out of third place—ABC did it in the 1970s and NBC did it in the early '80s—but that's tougher to do now. The Big Three consistently drew 95% of television viewers 15 years ago, but the proliferation of home TV choices—primarily in the form of cable offerings and videocassettes—has weaned away so many viewers that the networks now draw an average of only 69% of the TV audience. Given the Big Three's smaller share of the audience, CBS's third place in '90 is comparatively harder to overcome than ABC's third place was in '75.
CBS's hope is that prime-time mega-sports will deliver a dependably large number of viewers who, so the reasoning goes, will sample the network's entertainment shows promoted on the sports telecasts and become the base for an expanded audience for them. This worked for ABC when it aired the 1976 Winter Olympics in prime time. The following season, the network, which had formerly been dismissed as the Almost Broadcasting Company, sprang into first place.
However, using sports as a promotional springboard has failed more often than it has succeeded. ABC plugged the daylights out of a red-white-and-blue stinker, Call to Glory, during the 1984 Olympics, but it was soon canceled because of poor ratings. The same thing happened to The Bronx Zoo, which NBC flogged during the '87 Super Bowl, and Grand Slam, which CBS trumpeted during this year's Super Bowl. As Dennis Swanson at ABC once put it: "Promotional value can be an excuse for frittering away a lot of money." Don Ohlmeyer, a former executive producer of NBC Sports, says, "You can get a lot of people to sample a program by pushing it on a prime-time sports event, but you can't make them like it after they've sampled it. You either have good shows, or the promotions don't help."
Of course, CBS didn't accumulate prize events solely as promotional platforms. As Stringer says, "Sports events can accelerate ratings right away. They offer a sudden shock-surge by themselves, and they appeal greatly to young males, which is a section of the audience we haven't been reaching as well as we might like."
And an important sports event is as close to a sure thing in the ratings as there is. "The money is so high for the rights because you know what you are getting," Pilson says. "You will have a strong 40-to-45 rating for the Super Bowl, you will have an 18 rating for the league championship series. Sports are not like War and Remembrance, where you gamble $40 or $50 million and wind up with a total flop. With sports you are buying an assured audience."
Still, each event, each sport, each season is different, and each brings its own unique character to a network. Here are Pilson's observations behind some of CBS's more impressive expenditures:
•The 1992 Winter Olympics in Albertville ($243 million) and the '94 Winter Olympics in Lillehammer, Norway ($300 million):
"We are dealing in two main elements in all of our biggest properties. One is the Big Event philosophy, and the other is the exclusivity principle. The most significant change in television in the last 10 years is the incredible proliferation of programming. There used to be basically three or four or five signals in the average American home. Now there are 30 or 40. And so many of them deliver so much sports—maybe 20 college basketball games a week in the winter. So how can network sports compete in such an overcrowded environment? By having the biggest events and having them only on our network.
"This is what the two Winter Olympics give us. No one else has them, and we think they are as big as any events ever get to be. And, of course, in keeping with our philosophy of building prime-time ratings, both of these Olympics will run in sweeps-week periods [February] and will help build our season average. We were never as interested in the Summer Olympics because they occurred in July and August, when we simply didn't feel that prime-time results mattered as much."
•Major league baseball ($1.06 billion), 1990 to '93, each year consisting of 16 regular-season games, plus the All-Star Game, the league championship series and the World Series:
"We had been planning to get baseball for several years. We are most interested in the prime-time aspects of the postseason. And we wanted both the championship series and the Series. ABC and NBC split the LCSs, of course, and obviously they didn't promote each other's programming. We felt that diluted the interest in the playoffs as well as the Series. Now we'll have the whole package. During the regular season there will be a big proliferation of baseball games over different channels—cable and local stations. But when the season is over, all that interest building up during the summer will then funnel to the postseason games we're showing on CBS. This is the Big Event philosophy at its best."
There has been a lot of skepticism about the huge price CBS paid for baseball. The network reportedly has had to discount ads by 40% or more on its regular-season games, and critics believe it may lose as much as $75 million a year, about one quarter of CBS's 1989 profit.
Pilson says baseball will be "revenue-producing" but then argues that making or losing money doesn't really matter anyway: "You don't judge baseball just by whether you're losing money or making money on it. In a supermarket, they put the milk in the back so the customer will have to go past everything in the store to buy milk, and in an airport newsstand, they put the newspapers at the back for the same reason. Now you don't ask a man whether he's losing money on milk or newspapers, because making money isn't the point of these products. On CBS, baseball is our milk and newspapers. There is so much exposure because of it. There is leverage on the affiliates because of it, and our stockholders and Wall Street are all happy because we have it."
•The NCAA basketball tournament ($1 billion), 1991 to '97:
"This, too, is the perfect Big Event situation. All season there will be hundreds of basketball games televised locally and on cable all over the country. But when the NCAA tournament starts, all the attention that's been scattered will suddenly be focused on CBS. We'll be on for three weeks with lots of prime-time coverage."
Next season will be the first time a broadcast network will carry the entire 64-team tournament (ESPN has had early-round games for nine years). The idea of biting off the whole tournament was Pilson's—"It came to me in the shower," he says—and even though telecasting the NCAAs will require CBS to perform some programming contortions both day and night, the acquisition was well received. "The affiliates showed more enthusiasm for it than any other deal we have presented to them," said Pilson. "Our original deal called for six years at $860 million, but the NCAA asked if we wouldn't like to stretch it to seven years and make it an even billion."
•The NFL ($1.06 billion), 1990 to '93, with NFC games and the '92 Super Bowl:
"The NFL wanted a whole pot of money, but we didn't know how much. It was a very tense negotiation. At first we thought they were going for $30 million per team per year, which we figured we could handle easily. Then it seemed as if they had set it at $35 million a team. This, we decided, was too rich for us. We had a figure above which we simply would not go. As things got more solid, we realized the number was between $32 million and $33 million a team, so we made the deal."
To give the networks more "product" for their money, the NFL agreed to extend the season by two weeks and add an extra bracket of playoff games—ideas that came from Pilson's morning showers.
Among the properties CBS didn't spring for was the NBA, which NBC picked up for $600 million over four seasons starting next fall. Pilson says his network can tolerate losing pro basketball because the final rounds of its playoffs occur in late May and early June, after the sweeps are over. CBS also lost the entire CFA college football package to ABC. The network's rationale—or rationalization—for dropping college football was that its Saturday afternoon games had no impact on prime time and thus didn't address CBS's most pressing needs.
Whatever ratings CBS actually draws during this Dream Season, the fact is, it has gambled an astonishing sum of money on sports in following a master plan for success that, in the long run, will have very little to do with sports events at all. Though some of these high-priced properties will certainly create their own high ratings and may conceivably make their own profits, the key to the effort to resurrect CBS lies exactly where it did before Tisch and Pilson started spending billions on games—in its prime-time entertainment lineup. With good shows, CBS zooms back toward the top. With bad shows, CBS stays in or near the cellar. No one understands this better than Pilson: "In the end, the entertainment division has to turn us around. CBS Sports cannot do it, no matter how large an audience we draw, no matter how much money we make or lose, no matter how wonderful our productions are. Nothing will make a difference unless our entertainment people find some winners."
As we wait to see which way the CBS world turns, we can ruminate on the fact that but for the lack of two Cheers, The Simpsons, and a couple of Golden Girls, the greatest sports empire in television history would not exist at all.
FOUR ILLUSTRATIONS
TWO ILLUSTRATIONS
PHOTO ILLUSTRATION
LOUIS PSIHOYOS/MATRIX; GARY BASEMAN
PHOTO ILLUSTRATION
MARIA ROBLEDO; GARY BASEMAN
TISCH BANKROLLED SPORTS WITH THE HOPE OF STOPPING CBS'S SLIDE
PHOTO ILLUSTRATION
LOUIS PSIHOYOS/MATRIX; GARY BASEMAN
PILSON'S VISION IS FOR HIGHER CBS RATINGS THROUGH SPORTS
TOWERING OVER ALL
CBS is outspending ABC and NBC for lights to all top-drawer spoils except college football and the NBA
ABC
COLLEGE 1990-96
$287 Million*
NFL Monday Night
$900 Million
NBC
NOTRE DAME 1991-95
$38 Million
NBA 1990-94
$600 Million
NFL-AFC 1990-93
$752 Million
SUMMER GAMES 1992
$401 Million
CBS
COLLEGE 1990
$16 Million
WINTER GAMES 1992, '94
$543 Million
MAJOR LEAGUE 1990-93
$1.06 Billion
NCAA 1991-97
$1 Billion
NFL-NFC 1990-93
$1.06 Billion
FANS' DELIGHT
This year CBS will carry more than half the total hours of sports that will be shown on the three major networks
ABC 21%
NBC 26%
CBS 53%