TERENCE SMITH: We were talking about the ways in which over the last, let's say, the 24 years that ESPN has been around, the way in which sports have affected television and vice versa.
Tell me how they happened.
GEORGE BODENHEIMER: I think the explosion of the popularity in sports in the United States has a large part to do with networks like ESPN and others that are on cable television that have, basically, brought a wide variety, the widest variety ever of sports television to the viewing public.
And we now have all different kinds of sports, more games than ever, extended coverage, more sports news, more topical information, niche networks devoted to various sports. So I think it's clearly shown people there's a lot more out there, and they're taking advantage of it. It's, to some extent, all being viewed.
TERENCE SMITH: And reverse, the vice versa, have sports as a commodity, if you like, affected television?
GEORGE BODENHEIMER: Well, I think so. It continued to play a large role in television if you look at the consumer aspects of it where, you know, 80, 85 million people in United States are subscribing to some form of either cable or satellite television.
A large portion of that is because of the demand that is driven by sports, and sports is one of the primary drivers encouraging that subscription.
TERENCE SMITH: You were talking about the proliferation of newer sports, X-games, that sort of thing. Is there a consequence to that?
Do younger viewers tend to drift away from the more traditional so-called stick-and-ball sports?
GEORGE BODENHEIMER: I think there's a pressure on the so-called traditional sports, the rise of new sports, the popularity of new sports -- such as the action sports that we televise in the NRX games, the rise of Nascar auto racings, another example that really wasn't on the radar screen five, ten years ago in terms of the levels that are now.
I think those certainly are putting pressure on the so-called traditional sports, but I don't think that traditional sports are in any, you know, risk of being usurped; I just think the landscape is changing as it does for all products in life cycles, and that's what's happening here.
TERENCE SMITH: But there was a day when you could watch your home team, say your baseball team, you could watch most of the games on television, over the air, on a routine basis. What's happened to that?
GEORGE BODENHEIMER: Well, I think you largely can view your home team as well as many other games from teams from out of markets from many different sports.
So what's happened is actually viewing to sports on television is actually growing, contrary to some of the headlines that you read that cite declines in any one game or event. If you look at the pie overall, it's actually growing. So I think sports on television has never been as popular in United States as they are not, which it continues to grow. It's just spread out much more.
TERENCE SMITH: But you don't find those mainstream and traditional sports -- baseball, basketball -- on free, over-the-air broadcast television.
GEORGE BODENHEIMER: Well, to the contrary, you do see a great deal of those sports delivered on broadcast television, and a great deal amount also covered on cable television.
If you talk to a young viewer today under the age of 15, 70 percent will -- they can't even describe to you the difference between broadcast and cable television. So to them it's all just television, and they have a lot more choice than they ever had in the past.
TERENCE SMITH: Also in this period of time that you're talking about, we've had the huge rights fees and player costs and labor problems associated with, with some of the traditional sports, especially. How have they affected what's put on the air?
GEORGE BODENHEIMER: Can you give me that question again, please?
TERENCE SMITH: Well, for example, it really goes to the question of whether -- given all the rising costs -- broadcasters are creating the demand for new sports or the public seeks these new sports.
GEORGE BODENHEIMER: Well, I think that it's a little bit of both. I mean the public clearly enjoys seeing new and different types of athletic competition and, you know, as I said earlier, the viewing to all sports in aggregate continues to grow.
So we're, obviously, collectively as an industry, serving our fans with product they want to see. You know, whether it's the carrot, you know, or the stick, you know, I'm not sure, you know, which one is leading the other. But, clearly, we're serving them product that they like, that they like to view.
TERENCE SMITH: We've all read a great deal about the escalating costs of the packages that broadcasters pay to the NFL, to Major League Baseball, to the National Basketball Association. What do you see in all of that? Does that spiral just continue to go up or, given the cost of things, is it likely to go down?
GEORGE BODENHEIMER: I think it's very likely going to flatten, to go down. We're starting to see some evidence of that now.
Certainly internationally, ESPN's in 150 countries around the world, so we have a hand in a number of markets around the world. We're already seeing that internationally, and we're starting to see it domestically here in the United States. And I think that there's enough pressure on the market where fees will be flat to potentially down.
TERENCE SMITH: Give me an example here in the United States.
GEORGE BODENHEIMER: Well, I don't care to get into too many specifics because of my business partners, and I have no reason, you know, in this program to necessarily embarrass them, per se. But there are deals that are being cut now with less, you know, requiring less revenue to purchase that product than had been in the previous contract. It is happening.
TERENCE SMITH: Well, for example, the National Football League had an option to renegotiate its contract, its very lucrative contract with the networks, so now and it chose not to exercise it. What did that say to you?
GEORGE BODENHEIMER: Well, it said to me that the NFL is happy with their existing slate of broadcasters and telecasters, ESPN and ABC being in the forefront there along with CBS and Fox; that we're doing a good job, collectively, presenting their sport to their fans, and they're happy with their current deal.
TERENCE SMITH: And they may have also concluded that they maxed out what they could get for it.
GEORGE BODENHEIMER: You might have to leave that up to them to answer.
TERENCE SMITH: ESPN, I guess, is broadcasting fewer games but paying about the same as you did before in the NBA?
GEORGE BODENHEIMER: Let me try that one again.
TERENCE SMITH: For basketball.
GEORGE BODENHEIMER: Right.
TERENCE SMITH: Is that a fact that you're broadcasting fewer games but paying about the same price?
GEORGE BODENHEIMER: We just concluded ESPN and ABC's first year of our new NBA contract, so we had a very successful year. We're very happy with the deal we cut, and it clearly strengthened both ABC Sports and ESPN.
TERENCE SMITH: Were there fewer games broadcast? Relative to another network that was broadcasting them before?
GEORGE BODENHEIMER: Oh. That's where you got me. I was a little hamstrung on that one. There were fewer games televised on broadcast television, on ABC this year versus NBC in the prior years.
If you add all of the games that were televised by our company, we actually increased the number of games that were televised to the NBA fans on our properties.
GEORGE BODENHEIMER: ESPN and ABC combined.
TERENCE SMITH: You know, in a recent hearing Senator John McCain asked, in effect, why should consumers pay for programming they don't want? Which went to the issue of ESPN and whether it should be moved off basic cable to another tier. What do you say?
GEORGE BODENHEIMER: You know, I think if you look at products in the United States and you look at the cable industry and now the cable and satellite industry over the last 25 years, the basic cable subscription that is sold for roughly $40 per month is one of the best products that has ever been invented in the United States. And, you know, you don't have to take my word for it.
You just look at the 85 million people that are subscribing, and that number continues to grow. So I think that, you know, it's a tremendous value if you look at other entertainment options whether it's to go out to dinner, go to a movie, you know, go to an athletic event itself, you know, a monthly cable subscription is a tremendous value.
And to break that apart by taking, you know, ripping various networks out of it by, you know, regulation, I don't think it's going to be a very pro-consumer move at all.
You know, basically, my answer to that is the business is working today and will continue to work. And the consumer is very happy with the product being delivered.
TERENCE SMITH: I guess what John McCain is saying is, why should a consumer who doesn't want to watch ESPN and the events on it pay for it, if it's a significant element in that monthly payment?
GEORGE BODENHEIMER: Well, I mean virtually any product that is packaged, not every consumer is going to use every aspect of that. For example, your local newspaper, your daily newspaper. You may not read every section of that, but you still find you get enough of a value in the overall package to continue to subscribe to that. And I think the analogy here is the same.
TERENCE SMITH: Cable operators complain a great deal. They say they pay $2 per subscriber, although I know that's a disputed figure. Is there any resolution to this?
GEORGE BODENHEIMER: Well, we have what I term a very healthy relationship with our distributors. We're good for their business. ESPN ranks No. 1 in virtually every survey that its ever done in terms of, you know, why people subscribe to cable, why people keep cable.
It's also No. 1 in local ad revenue generated by the cable operator. It's just a tremendous piece of that value equation, and we've done business with our distributors for nearly 25 years now, and I'm very confident we'll continue to successfully negotiate and have win/win propositions with them.
TERENCE SMITH: So you see no serious prospect that ESPN will be taken out of basic cable and put into some premium tier?
GEORGE BODENHEIMER: I really don't, for the simple reason, Terry, that it's not consumer-friendly.
TERENCE SMITH: Um-hmm.
GEORGE BODENHEIMER: And we're here, collectively, to cable operators and ESPN and other cable networks serving the consumer.
TERENCE SMITH: And you see no movement within the industry in that direction?
GEORGE BODENHEIMER: I really don't. I don't think it sounds better than it is when you start to look at it and try to see how you might implement that from a technology perspective; from a marketing perspective I think it falls apart.
TERENCE SMITH: Do you have any sense from where you sit of what's happening to younger viewer, this 12-to-24-year-old set that is obviously the future for you and every business in terms of their tastes and what they're interested in, vis-a-vis sports? What are the trends and what do they portend for the future?
GEORGE BODENHEIMER: I think the biggest change in the younger consumers versus older consumers is they're consuming sports television differently.
They want what they want what they want faster, more graphics, you know, give them the story quickly and let's move. It's a much more frenetic pace than I think we're used to, you know, in the, quote, "old days."
You know, you have a great deal of these younger kids are actually multitasking, they're on line at the same time they're watching television and, you know, might have the phone going at the same time. And that environment is real. I mean we have 11 million people a day come into ESPN.com, and we know a large portion of that are doing that while they're watching us on air.
GEORGE BODENHEIMER: So, clearly, there's, you know, some different trends afoot.
TERENCE SMITH: What effect does that have in the way you present and broadcast sports?
GEORGE BODENHEIMER: Well, for us, this trend is actually an advantage because we have leading media in TV, on the Internet, on the radio, and in print with ESPN and the magazine.
So we're focused on a single editorial viewpoint, a single marketing focus, a single brand, and what we try to convey to our consumers is whether you read us in the magazine, you listen to us on the radio, you're on line with us or you're watching our television networks, you're getting that same ESPN sensibility. So we'll serve you any way you care to be served.
TERENCE SMITH: No, I didn't mean that. I meant you commented on the frenetic pace of the way the younger fan consumers sports today. Is that affecting the way sports are programmed today?
GEORGE BODENHEIMER: Yes, I think it is. I mean, certainly, we're providing more highlights, you know, quicker-paced analysis. We in some senses pioneered the idea through Sports Center, we like to have fun on the air. I mean, you know, after all sports is intended to be fun, and I understand it's a big business, but we like to have fun on the air, and that's a big piece of our, our of kind of the brand sensibility of ESPN.
But our consumers tell us loud and clear that it's, you know, it's what they want. They want to have fun. TERENCE SMITH: Can you think of an example of the way any game might be presented today that is different from the way it was presented before?
GEORGE BODENHEIMER: I think you see changes in graphic approach is probably the biggest change you would physically see on the air, more graphics, more information. The kids are more visual. They want to see what's going on. They want you to tell them a fact. They want you to educate them.
There's also more use of music you see on the air behind sports product, whether it's highlights or games, than you saw in the past.
TERENCE SMITH: Once of the attractions of baseball to its most devoted fans was actually its leisurely pace.
GEORGE BODENHEIMER: Um-hmm.
TERENCE SMITH: And it's pacing. What's happened to that?
GEORGE BODENHEIMER: Well, baseball, you know, remains, you know, in a premier position in the United States in terms of its position. And, you know, we're very devoted to baseball. We televise more baseball in a well than, you know, any other media outlet. And I think that they're in the same boat that everybody else.
They've got to, you know, find ways to continue to serve the fan that is interested in the leisurely pace and the beauty of the game, and the new kids, you know, who may want their baseball packaged differently and brought to them more quickly and in a different environment. And we work closely with baseball to provide many different products to do that. "Baseball Tonight" is probably the best example.
TERENCE SMITH: And, in fact, it's affected the game somewhat. If you look back over the 20, 25 years or more that you've been in this business, does baseball look and sound different to you?
GEORGE BODENHEIMER: Well, I think in some respects they do. We're working hard with baseball to provide new ways to present the game, more mikeing of players, more inside access, the kinds of things that kids want to see today. And, you know, one of the greatest things about baseball to anybody who's a fan of baseball is the strategy, and that's, you know, that leads to a great part of the enjoyment of the game.
So we're working hard to continue to bring the strategy of the game to the young fans.
TERENCE SMITH: Um-hmm. Has it affected or changed the nature of the game?
GEORGE BODENHEIMER: You know, I'm not sure that it has. Probably be better speaking directly to the baseball people on that. I'm not sure.
I know I still enjoy it as a fan for the same reasons I've enjoyed it since I was a kid, just, you know, liked baseball, been a fan, enjoy the pace, and I like to follow my team.
TERENCE SMITH: And football, what about that? Has that changed? Or, for one thing, of course, it has very convenient rhythms for commercials, for example, and they are laid out to work that way. Has that changed?
GEORGE BODENHEIMER: Well, football continues to grow. It's a terrific sport not only in terms of its presentation on the field and while you're in the stadium, but it's a terrific television sport. So I see it continuing to grow.
I'm not sure if it's really changed much. The game is faster, it's quicker, the athletes are bigger and stronger, which is true in all the sports. And, obviously, with the NFL, you know, more teams have become more competitive more quickly. So I think you have an opportunity for more fans in the league to be involved.
TERENCE SMITH: Finally, these fantasy leagues. That's something that's come along and become enormously popular. What effect does that have on a broadcaster of television?
GEORGE BODENHEIMER: Well, I think you see all media, ESPN included, working to serve the fans that are involved in the various fantasy leagues.
It's your most hard-core, your most avid fan, so certainly while you look to appeal to the whole gamut of fans, you want to take care of your most avid fans as best you can.
So, you know, we supply information that caters to those fans whether it be on wireless products or ESPN.com or even on our television, because it's a growing phenomenon, and I think it's enhancing many people's enjoyment of sport.
TERENCE SMITH: Finally, look ahead for us. What do you see in the broadcasting of sports in the next period of five or ten years? What trends? What do you expect to happen?
GEORGE BODENHEIMER: I think that more and more sports will continue to be telecast on our channels as well as a variety of other channels. I actually see more networks being developed. I see more inside access.
I think we, as the media, will continue to take you, the fan, closer to the action, and I think that'll be interesting and of benefit to all involved.
TERENCE SMITH: So must more and more. You don't see a cap.
GEORGE BODENHEIMER: You know, we've never overestimated the American fan's desire for sports. And I'm hoping we never do.
TERENCE SMITH: What do you see for, you know, ABC Sports included, for the broadcast networks and their coverage of sports and the amount of time --
GEORGE BODENHEIMER: It's, you know, it's a challenge.
TERENCE SMITH: Yes?
GEORGE BODENHEIMER: Single revenue stream versus two-revenue streams is tough.
Now we here have an advantage because under one corporate umbrella we had, you know, the best of both worlds. We got this leading Sports Center, I mean, and we've got ABC Sports.
TERENCE SMITH: Right.
GEORGE BODENHEIMER: So, our challenge is how we're going to put them both together, you know, in management.
TERENCE SMITH: It's a big challenge, too, because the economic model doesn't work any more. Not at today's prices.
GEORGE BODENHEIMER: At today's prices it's tough to justify by saying we think it'll be good for promoting our other series.