TERENCE SMITH: OK, at that event last week (CBS President) Les Moonves said that CBS did not feel like a network when it didn't have football. Why? Explain that to me. Why is football so important to a broadcast network?
SEAN McMANUS: Well, in many ways from September through January, NFL football is (one) of the primary products on television. It gets a huge rating every Sunday afternoon, every Sunday night, and every Monday night. It is not just the most dominant sports property during that time of the year, in some ways it's the only sports property during that time of the year.
And if you're a network and you don't have all those viewers tuning into your network every Sunday or every Monday night, you're missing something. From a promotional standpoint, the lack of all those men watching CBS every Sunday afternoon drastically hurts CBS' promotional opportunities.
It hurt our selling opportunities, and I think it really hurt our prestige as a network. CBS was known for broadcasting the NFC, all those great New York Giants games, Pat Summerall , John Madden.
That was part of the foundation of CBS, and when it suddenly wasn't there, I think people at CBS understood just how important NFL football was to the network.
TERENCE SMITH: How long did it take to realize that the decision not to bid was a mistake?
SEAN McMANUS: I'm not sure I'd classify it as a mistake, because the gentleman who made the decision made it for, I think, financial reasons.
But I think during that first season when not only CBS began to take some hits in terms of promotional opportunities and in terms of viewing audience but, more important, when the Fox Television Network almost overnight elevated itself to a level with the other three networks, I think the impact that NFL football had on Fox, positively, had as much of an effect on CBS as the NFL did to CBS, negatively.
So I think CBS probably drastically underestimated how important the property would be to Fox and how important a lack of it would be to CBS.
And when we got the NFL, one of the comments that was made by the executives at CBS who brought the NFL back to CBS was (that) we maybe were the only network in this country that understood how important NFL football was because we were the only network ever to have NFL football and then lose it.
So I think we may have put a bigger premium on the property because we knew how bad it was to live without the sport.
TERENCE SMITH: Even though it's a very expensive property.
SEAN McMANUS: It is. It is the most -- other than the Olympics -- it is the most expensive sports property, but the value that you get in terms of the revenue that you generate through sales and the value that you get from the promotional opportunities for CBS, it's a property we very much like to have and very much want to keep in a financially responsible way.
TERENCE SMITH: You have said that football -- that CBS can make and does make money on football. Is that real money in the dollars and cents paid and brought in -- or is it the tangential considerations you're talking about?
SEAN McMANUS: No, we've been very consistent in that. When we did our NFL deal six years ago, we said that we would make money each year of the deal with respect to how much revenue we brought in and how many expenses we had. And that's been true the first five years of the deal, and we believe it's going to be true for the next three years on the deal.
TERENCE SMITH: For a little money or a substantial amount of money?
SEAN McMANUS: More than $1 a year, which was the order that Mel Karmazin (president and chief operating officer of Viacom, CBS' parent company) gave us when we were doing the deal -- at least a dollar a year.
TERENCE SMITH: Well, you set the bar fairly low.
SEAN McMANUS: Well, when you look at the other values that we get, if you quantify how much it would cost if you went out to buy the advertising that CBS gets for its promos and NFL foot for 17 Sundays, for all the play-offs and for the Super Bowl every three years, to buy that kind of exposure and buy that kind of promotional value would almost be unaffordable for any network.
So when you factor that in, the profit that we make, really, in some ways is the gravy.
TERENCE SMITH: And yet other sports -- baseball, basketball -- have not fared so well on television, on broadcast television.
SEAN McMANUS: Um-hmm.
TERENCE SMITH: Why?
SEAN McMANUS: Because the networks that bought those properties paid more money than they could generate in sales.
And I think they overestimated, perhaps, the value of the advertising. They ran into tough economic times with the recession. The advertising that used to generate an automatic 7, 8, 10 percent per year in increases just evaporated, and in the enthusiasm to do those deals.
CBS in the early 1990s with their baseball deal wrote up over $500 million. It was just an over-enthusiasm to get the product and perhaps some kind of miscalculation with respect to how much revenue would be generated from advertising sales.
TERENCE SMITH: I think fans and the public wonder which came first, the chicken or the egg, in the escalating prices paid to individual performers on the baseball field or the basketball court, particularly, and the prices that were subsequently paid for television and then the prices for tickets. Where did it all start?
SEAN McMANUS: Well, it really started, when you look at the large dollars involved, with network television paying increasingly larger and larger television fees.
And until Fox came on the scene a dozen years ago, basically, you had three networks fighting for three network packages in the NFL. And the competition for that property was less than it certainly was when Fox came in and said: "We want a piece of football, we want a piece of hockey, we want a piece of baseball because we believe, even if we overspend for those properties, those properties can be used to build the asset of the Fox Television Network." So it was no longer how much money can we make or lose on those sports; it was what could those sports do to build a fourth network.
TERENCE SMITH: So it's no longer economically feasible -- not just for CBS but on television -- to put on baseball games or basketball games in prime time?
SEAN McMANUS: Well, it's economically feasible if you pay an appropriate rights fee. We don't think it's economically feasible for CBS.
We have a list of sports that are successful from a financial and programming standpoint in CBS. We have a lot of golf, we have NFL football, we have college football, we have some tennis, and a lot of college basketball.
Those sports work well for CBS from a financial and a programming standpoint. Baseball didn't. Hockey didn't. The NBA didn't. We've been pretty choosy about what events to buy, and the events that we buy, the criteria is simple: It's got to work from a programming standpoint and a promotional value, and it can't lose money for the CBS television network.
Now, my boss, (CBS Chairman) Leslie Moonves is very intent on making sure that whatever property we buy makes at least a dollar a year or we're not going to bid on it. Now, it gets further complicated when you try to predict the advertising marketplace five or six years down the road. That's tough to do.
We have become increasingly more conservative in our estimates on advertising just because we want to make sure we don't have to take large write-offs in sports. We haven't written off money in our sports programming and don't want to, so, if anything, we're going to be more conservative going forward than we had been in the past.
TERENCE SMITH: But is the net effect that sports -- like baseball through the season, basketball through the season, and hockey -- are disappearing therefore from over-the-air free broadcast television?
SEAN McMANUS: It's much tougher for a broadcast network to justify airing a large number of regular season baseball or basketball games, NBA basketball games, than it is for ESPN or ESPN-2, or even the Fox Sports Network.
Those networks are basically based on tonnage of sports. If they can do three or four baseball games a week, if they can do Sunday night and Monday night and perhaps Saturday afternoon, that makes more sense for a cable network than it does a broadcast network. Plus cable networks like ESPN are on 24 hours a day, and they are getting over $2 every single month from every single subscriber, which is a revenue stream that the networks do not have.
So I think you'll still see the major large big events on network television -- the Super Bowl, the World Series, the NBA finals, the Kentucky Derby, the final four.
I think those will stay on network television.
The weekly sports during the regular season, like the NBA or baseball, I think will continue to migrate towards cable television. But there's still going to be plenty of room for network television in broadcasting big-time sports over the air.
And I think in some ways the leagues understand an obligation to the fans to keep those events where I believe they belong, which is on network television.
I think if you said to the American public, 20 percent of you who do not get cable will not have access to the final four or the Super Bowl, or the World Series -- I think that would be a big mistake, and I think that's not likely to happen in the foreseeable future.
TERENCE SMITH: But for the average fan, then who wants to watch his team, he or she has got to go to cable?
SEAN McMANUS: For regular season in some sports that's true, or have a satellite dish.
A satellite dish, basically, provides all the benefits that cable does, including the outer-market packages, like the "Sunday Ticket" that the NFL offers. Plus if you have a satellite, you can watch ESPN or all the Fox sports networks, or all the other regional sports networks.
But if you want to watch all the sports that are being aired in America, you've got to have either a cable hook-up or satellite dish or you're going to miss a lot of sports actions. That's just a fact of life.
TERENCE SMITH: And what do you think of that as somebody who's been in this business for a long time? And has watched this change, this migration, to use your word. What do you think of it?
SEAN McMANUS: Well, from a broadcast standpoint it might likely be a lot easier if there was no ESPN and no Fox Sports Network. But that's a fact of life that we're living with now.
And it's a fact of life that if you want to watch those sports, you've got to have access to ESPN or the regional sports networks. The fans may not like it, but it's a fact of life.
It's also a fact of life that it costs a lot more money to go to an NBA game than it used to five years ago. And, you know, the average fan living on limited salary may not be able to take a family of four to an NBA game. That's a fact of life. It's a set fact of life, but that's a fact of life. It's like any other business, it's supply and demand.
You also may not be able to go see a Rolling Stones concert which might cost $200 because there are enough people who will pay that much money to go see a concert.
It's supply and demand, and there is so much pressure because of athletes' contracts and all the new stadiums being built, and the leverage position a lot of owners have. There is so much pressure in major sports now in general that sometimes the average fan does get squeezed out, either as a television viewer or as a fan who wants to go to a game, And it's sad, but that's a fact of life right now. We have to live with that fact.
TERENCE SMITH: Has it had an effect, this fact of life or these facts of life, on the sports themselves? SEAN McMANUS: It's a really good question. You mean, on the actual sports themselves, how they're played on the field?
TERENCE SMITH: Yes. Well, I mean I understand the rules haven't changed...
SEAN McMANUS: Yeah.
TERENCE SMITH: But has it had an overall impact on the sports themselves? On the leagues, on the competitiveness, and the accessibility to the public or lack thereof? What about on the sports themselves?
SEAN McMANUS: I think all the attention that is now focused on sports in this country in some ways have put more pressure on athletes themselves to do more things to make themselves stand out.
Fifteen years ago I don't think you saw the kind of displays of either spontaneous or fabricated emotion on the field; I don't think you would have seen a player reaching into his sock and pulling out a pen and signing an autograph on Monday night football, like happened last year; I'm not sure you'd see all the attention-grabbing, posing that you see.
I think part of that is because athletes, kind of like broadcasters today, some feel the need to distinguish themselves, perhaps more than they should and make themselves a bigger part of the story.
And that's part of what the sports culture is today. There's probably too much, "Look at me instead of looking at my team." I think part of that is because all of the attention that television and the media has focused on, these big-time events.
But -- and I think that it's sad in some ways -- but in all facets of television, we're all trying to get the viewer and give the viewer a reason to watch our products. And I think sometimes the fans and the broadcasters maybe go too far in a way to say, "Let's watch my product."
You know, maybe we promote the, you know, the violence a bit more than we should; maybe we promote some aspects that aren't pure sports because we're all in such a big competition to make sure more people watch our product.
I don't think we've ever crossed over the line, but it's tempting to promote things that maybe are not the actual essence of the sport but maybe are things that might bring in the fringe viewer. I think we have to watch ourselves when we start to cross that line, also.
TERENCE SMITH: And it's tempting for the players to play to the camera.
SEAN McMANUS: Yeah. There is so much revenue and so much attention generated from things that you do off the field if you're an athlete, from a positive and a negative standpoint.
You know, who gets the most attention on the field? Maybe sometimes the guy who gets the most attention is the guy who had the best touchdown dance, or the guy who is the most flamboyant with respect to the car that he drives or the company that he keeps.
And these athletes realize that if there are 45 guys on an NFL team, maybe three of them will get the huge endorsement deals, and maybe some of those endorsement deals will not be just reflective of how well they do on the field, but what kind of personality they have, how much the kids follow them, you know, what kind of reputation they have on the street.
And sometimes athletes spend as much time, I think, worrying about that as they do worrying about how can I make the next great play in this game.
TERENCE SMITH: So it's not enough to gain 1,000 yards to a season; you have to be a personality.
SEAN McMANUS: Yeah. I mean there are a lot of guys who gain 1,000 yards each season, but there aren't that many people who have the personality that will make a shoe company or a car company or a computer company want to associate you with that product. And an athlete only has so many ways to project his personality. He can do it on interviews, he can do it on the field, he can do it, you know, as he's socializing. And these athletes are pretty savvy and their agents are very savvy about projecting an image on and off the field that an advertiser wants to associate himself with.
Andre Agassi is the prototype of that. Andre realized and his agents realized when he was 16 years old that they were going to sell a very specific image. And it's not a mistake that the campaign for one of his primary sponsors, which was a camera company, is image is everything.
I mean they understood that the image of Andre Agassi was as important, if not more important, than his ability on the tennis court. Yes, he has to be a great world class tennis player, but what they were selling with Andre Agassi in a positive way, which was Andre's image.
And that is just projected on every other athlete today. They're trying to, as I said, project an image that advertisers will find appealing, or they think the fans will find appealing, and that image is different. It's different for a shoe company than it is a soft drink company or a fast food company. The image that Reebok is trying to project and the product that Reebok is trying to sell to is a group different than McDonald's is trying to sell to.
And you'll see perhaps an Alan Iverson being an incredibly appealing endorser for a sneaker company but not a very appealing endorser for a McDonald's or a Coca-Cola because of the image that particular athlete projects in the community.
TERENCE SMITH: Going back again to your point about certain sports migrating to broadcast television and pricing themselves up quite high.
SEAN McMANUS: Um-hmm.
TERENCE SMITH: Are sports in danger of eating their young in the sense that they erode, or essentially erode, or jeopardize their fan base which has to be the younger generation?
SEAN McMANUS: I think that's something that all the leagues are very, very cognizant in watching.
The NBA thought very, very carefully before they took a lot of their games off of network television and put them on cable television. But they believed that their core audience that wanted to watch NBA games, most of them already had access to either satellite or cable television. They were a younger, sophisticated audience.
They felt that perhaps the gross rating points generated by taking those games off network television might be a bit less, but the overall image and the overall exposure of the NBA would be better served by putting more of those games on TNT and ESPN.
And I think their bet may pay off. I think in the short term their network ratings may go down. But I think in the long term, they may prove themselves a bit ahead of the curve in understanding how cable television is so important for a sport.
Now, I think they also realize, as do we at CBS, that network television in a lot of ways is still the foundation of all these sports. It's great to have, you know, 75 NBA games on TNT and 60 NBA games on ESPN, but if your biggest events like the NBA finals aren't on network television, in my opinion long-term that's a big mistake. I think if Sunday afternoon football was not available to every man, woman, and child, that would be a bad, bad thing for the NFL and eventually would hurt the NFL fan base.
And I don't ever anticipate a situation where the NFL Playoffs for Super Bowl are not available to every person who has a television set in America.
TERENCE SMITH: At your meeting with the print press last week, there was a lot of talk about the impact of Internet use, of fantasy games, of computer games and the way they've influenced younger viewers.
SEAN McMANUS: Um-hmm.
TERENCE SMITH: Is there a danger that those competing entertainments are going to siphon off younger viewers?
SEAN McMANUS: I don't think so. First of all, the fantasy leagues, I think, are a real boon to all sports.
It increases interest particularly among the young computer-savvy potential fans who love being on the Internet, who love trading players, who like getting as much information as they can from the Internet site and from the team (Web) sites. They love that, but it's difficult for me to image that someone who is in a fantasy league is not going to want to watch NFL football on Sunday afternoon.
Our research shows that there may be as many as 10 to 15 million people out there, multitasking on a Sunday afternoon where they're watching football but also have their computer on so they can check the up-to-the-minute stats of all the players in their fantasy league. So I think that --
TERENCE SMITH: Ten to 15 million?
SEAN McMANUS: I think so, yes. That's the figure that we --
TERENCE SMITH: Out of a total audience of?
SEAN McMANUS: For Fox and us, probably 25 million on a Sunday afternoon.
TERENCE SMITH: So again the percentage?
SEAN McMANUS: A large percentage that are somehow multitasking. But listen, those figures may be a bit exaggerated, but even if they are, there's an audience out there that wants to follow their fantasy league with their computer and watch NFL football.
And the thing that I think is encouraging is as much fun as it may be to be on a computer and trade players and organize your fantasy league, that experience for almost everyone tails with the experience of watching the NFL on television, watching the NBA finals, or watching the baseball league.
So I don't think the fantasy leagues are siphoning off viewers or anything; I think they're increasing interest for a younger audience and building our audience on television.
TERENCE SMITH: You have an investment in Sportsline.com? SEAN McMANUS: Yes.
TERENCE SMITH: What impact does that have, and the interest that it attracts and generates have on the broadcast audience?
SEAN McMANUS: Well, much of it has a direct effect on the broadcast audience, but it, from a promotional standpoint, our association with Sportsline allows us to do a lot of things.
First of all, it allows us to package a multiplatform advertising sales. A lot of advertisers now don't want just advertising revenue in the games themselves, they want an Internet component, also whether that Internet component involves a fan poll or a promotion for their company. And it allows us, when we sell an advertising package, to include a very healthy and prominent Internet package, also.
It also allows us to promote what CBS Sports is doing. It allows us, as an example, if you're watching a PGA tour event on CBS, or an NFL game on CBS, it allows the viewer after the game to check CBS Sportsline, get more information on the game, get more information on the player, and I think all that helps build interest in the individual sports. And the more interest in the individual sports there are, I think increases our ratings and Internet.
And I've often been a proponent of the fact.
And if Monday night football or ESPN football is doing really well during a season, you can bet that Fox and CBS are also doing well on Sunday afternoon because the attention that feeds on a sport, whether it's Internet, whether it's well-known athletes, whether it's positive news stories, whether it's broadcast television, all that feeds on the interest in the sport and in the end translates into a higher rating for the broadcast networks.
TERENCE SMITH: Going back to that number that you used for people who might --
SEAN McMANUS: I want to make sure that number is right.
TERENCE SMITH: Well, I mean it's an estimate. I understand that. It's not a specific number, but does it follow, then, that sports themselves and the broadcasting in sports will have to adjust to the shorter time and attention span of that 18-to-24-year-old audience?
SEAN McMANUS: Well, you have to remember that probably the majority of our audience today is the traditional man or woman who wants to sit in a chair maybe with a cold beverage or some chips on his or his side and watch a football game from beginning to end, and the only thing he really wants to do with respect to activity is switch back and forth between Fox and CBS on a Sunday afternoon -- that's filled a majority of our audience.
And I firmly believe that there are people out there who are always going to want to look at sports as an opportunity just to sit there and be entertained, to cheer and have some fun.
On the other side, you've got a younger audience who likes working with the computer while watching he's watching the football or baseball game, if he likes multitasking, we'd better make sure that our broadcasts are vibrant enough with statistics and first-down lines and animations and all those things are vibrant enough to appeal to the new younger viewer, but also traditional enough so we don't alienate the guy who wants to sit there, or the gal who wants to sit there and just watch a sporting event and have fun.
And, you know, families get together to watch sporting events, and when families get together to watch sporting events, it's unusual to see one person in the corner playing with the computer. Generally, they're watching and rooting, and cheering and enjoying the game as a pretty passive experience with respect to what else they're doing with their, you know, their multitasking opportunities.
TERENCE SMITH: Do these trends that you've been talking about explain -- or I'll turn it around as a question: What explains in the years you've been in this business the rise of nontraditional sports, of extreme sports, of Gravity Games? Why are those things now so prevalent on television?
SEAN McMANUS: Well, I think two reasons.
One is the existence now of cable television and cable sports television. There is such a need for hundreds of hours of programming to fill the hours that an ESPN or a Fox Sports Network puts out, there aren't enough traditional sports to cover all those hours. So there is a huge programming need for that.
And the second large reason is advertisers are trying to reach a younger, hipper audience. And there are some advertisers who can reach their audience much more effectively with the Gravity Games or skateboarding contests than they can by spending the money through NFL football or the NBA.
So there's plenty of advertising dollars and plenty of sponsorship dollars to go around for the major sports, but if I want to reach a 12-to-18-year-old male, I'm probably better off doing that with the skateboarding events or BMX bicycle events or freestyle skiing events. I can do that a lot more efficiently and a lot more expensively than I can trying to reach them through an NFL telecast or something.
So it's the programming need that ESPN and the cable networks have and these advertisers who are just rabid to try to reach a specific audience.
TERENCE SMITH: And those sports are cheaper.
SEAN McMANUS: They're much cheaper, yeah. They're cheaper to produce. The athletes don't get paid a whole lot of money compared to what pro-athletes get. There's plenty of television time available, and an advertiser can make a very efficient and a very targeted buy by sponsoring those events. And any time you have programming need and advertising dollars, you're going to see a lot of that sport or a lot of those sports on television.
You also have a situation where there are some networks -- NBC being the best example right now -- some networks who have certain times of the year where they don't have a lot of major sporting events on the air. They've got to fill that Saturday and Sunday afternoons. If you've got advertisers who are saying, "I want to reach a younger audience," they might be very happy with a very, very small audience if that audience is primarily a certain demographic like young men or like young women. And if they can reach that audience, they don't mind spending the money to put that event on network television.
Therefore, you'll see a skateboarding event on network television on a Saturday afternoon which you might say, "Why am I seeing that?" It's because the advertiser has a need and the network has a need, and when they come together, there's enough money to put that event on television.
TERENCE SMITH: And, by god, you're going to see skateboarding whether you want to or not.
SEAN McMANUS: You are. You are. I mean there is a very logical and good reason why the Olympics is now adding the so-called extreme sports, whether it be freestyle skiing, whether it be short-track skating. It's because those events appeal to a younger audience. And any league organization who ignores the fact that they have to generate interest among the younger audience is kidding themselves.
You have to do that because those younger audience is the older audience of the future.
And when the traditional audience begins to lose interest or begins to turn over, so to speak, you've got to make sure that your product appeals to the new generation of yours.
TERENCE SMITH: Um-hmm.
SEAN McMANUS: And the challenge is appealing to that new generation of yours without alienating your traditional, sit-in-the-chair-and-watch-the-game viewer. So it's a delicate mix, but I think the leagues and the broadcast networks, and the cable networks have done a pretty good job of meeting that demand on both ends.
TERENCE SMITH: Finally, what concerns do you have about both sports and the broadcasting of sports going forward as you think about it? You mentioned twice your beliefs that it would be sad, to use your word, if the big events, the marquee events, were not available, for example, on over-the-air-free broadcast. What other concerns do you have?
SEAN McMANUS: Our primary business concern is trying to figure out how to keep the major sports properties that CBS Sports now has on CBS in a financially responsible way.
That's our No. 1 priority because sports are important to us, and yet they're not so important we're going to lose money on them. So I've had to figure out, my team, how to keep those events on network television.
Secondly, I think there is an obligation on everyone involved in sports to make sure that the really good and worthwhile parts of sports remain prominent. The fact that the game itself and the team is more important than how much money an athlete makes, or what kind of great individual performance an athlete has, that there are still great lessons to be learned in sports, and there's great entertainment to be provided by sports.
But if we focus too much on the big money business side of it and the money-making opportunities that a lot of us in sports have, then I think that may continue to perhaps erode the good, clean benefits that I think sports actually can provide for the American public.
And, you know, I still believe there is a certain value in the image and the values that an athlete should project in America. And there are so many great role models in America who are athletes.
The sad part is there are an awful lot of really bad role models, also, and my hope is that the good role models will continue to receive the attention they deserve and the bad role models will perhaps continue maybe lessen in number and not get as much attention as they seem to be getting on the news programs and the sports programs that we all produce.
TERENCE SMITH: May you be right.
SEAN McMANUS: I hope so.
TERENCE SMITH: Kobe Bryant notwithstanding.