THE SPORTS NET THAT FOX BUILT

On a hot, sunny, September afternoon in L.A., tucked away in a warehouse-size studio on the second floor of Fox Sports Networks headquarters, it was business as usual on the set of Best Damn Sports Show Period. Hosts Chris Rose and John Salley joked with guest host Steve Harvey in between segments of the grueling two-and-a-half-hour taping, as the director buzzed around giving orders. A gaggle of baby-faced Marine recruits from Camp Pendleton sat on bleachers in the studio audience, the perfect foil as Miss USA and Miss Teen USA tripped into the studio, all giggles and smiles. In a nod to the fact that this is, after all, a show about sports, Salley kicked off questions to the young lovelies by asking them how much trash-talking really goes on backstage at those beauty pageants. Welcome to the world of sports entertainment, courtesy of Fox. In its two years on the air, in fact, Best Damn has grown to be Fox Sports Net’s most recognizable national program as well as an incubator for ideas that can grow into shows in their own right. “This show can be anything it wants every single day,” says George Greenberg, the former executive producer of the show who in May was elevated to EVP of programming and production at Fox Sports Net. “That show is the most different thing out there.” In a way, Best Damn is a lot like FSN itself; both are still seeking their niche. The two-hour prime-time show will likely convert to a 90-minute format early next year. FSN, likewise, has experienced growing pains. With its seventh anniversary approaching this weekend, FSN’s professional and college teams generate blockbuster local ratings. But the network has seen its share of hits and misses as it’s tried to establish solid blocks of network-type programming — shows that advertisers and viewers would respond to — around its core of local games. These days, the 20 Fox Sports Net regional networks reach over 82 million homes, own the local cable rights to 67 of the 80 MLB, NBA and NHL teams and command a license fee that’s healthy enough to be placed alongside ESPN’s as among the highest in the cable industry. It wasn’t always so, although even in the mid-1990s some folks saw the potential. “I think everybody…knew they had something special,” says FSN president Bob Thompson, who also oversees Fox Sports International. “In order for it to fulfill its true potential there had to be a joining of what was a loose affiliation of regional networks — as someone once called it, ‘a ragtag group of misfits.’ If you could somehow formalize that structure and create a true network affiliate group there was significant potential.” That sentiment was echoed in lengthy interviews with several of the network’s senior executives. Virtually every facet of the regional networks’ infrastructure, from production to advertising to affiliate relations, had to be revamped, polished, rebranded and brought up to true network and broadcast standards. While the bulk of that work is long done, running a network that is actually 20 different feeds, as opposed to one or possibly two, presents its own challenges. Moreover, FSN, caught between distributors who are crying foul over high programming costs and a growing number of teams that either want to form their own networks or want more in the way of rights fees, is feeling pressure from all sides. Cutting distribution deals with cable and satellite operators has always been complicated, says Lindsay Gardner, EVP of affiliate sales and marketing for the nets. But these days, consolidation among distributors, not to mention a growing number of sports networks, makes negotiations a little more arduous. “There are very few deals that are simply sports deals,” says Thompson. “We call them ‘octopus’ deals. We have a plethora of other channels we can use to close the gap between what the network asks for and what a distributor is willing to pay. The flip side is, cable operators and distributors, many of them own channels and they want things from us, whether it’s Time Warner asking BSkyB in the U.K. or Star in Asia to clear CNN International, or HBO wanting to buy Twentieth Century Fox movie titles.” As for the teams that are exploring their own networks, FSN has proved its relevance with the number of renewal and new deals it has signed in the last year. And while Fox Sports Net has some vulnerability in a market such as Chicago, where the Cubs, White Sox, Blackhawks and Bulls informed FSN they would not renew their contracts next year, that situation is unusual. In most markets FSN is protected due to the staggered timing of its rights deals. “By and large I think most teams think we are paying them a fair amount,” Thompson says. “Most teams want to stick to what they know best, which is running their teams as opposed to running a network.” Adds COO Randy Freer, who notes that rights fees are stabilizing for certain sports, “We are willing and ready to pay reasonable rights fees. All we’re looking for is long-term expense predictability.” Because Nielsen Media Research only measures each FSN regional network on an individual market basis, FSN is never included in rankings of the most-watched national networks. This creates an ongoing frustration for executives at the network, whose local ratings for home-team games are routinely in the double-digits. On the programming front, clearing shows with the 20 local networks is always an issue, presenting a tricky puzzle for the folks who actually lay out the program grids for the networks and for the ad sales folks on the network side who may find themselves having to explain why Beyond the Glory didn’t run in Seattle due to a Mariners doubleheader. When new programs are introduced they have to be cleared with each network individually. The 20 regionals range in size from the 2 million subscribers for Fox Sports Arizona to the 10.4 million subs for Fox Sports South. FSN “is truly a broadcast model with a network of local affiliates as opposed to your typical cable network model which is single feed across the whole country,” Thompson explains. “We sort of have the best of both worlds. Now that does create some problems for the national side of the business, which I think everyone at FSN initially found out. You think you can program a show that’s going to go to 75 or 80 million homes and 40 million of them are off doing some local event.” The solution, he says, is to create shows that can fit in various time slots. As for scheduling national sporting events, FSN concentrates on high-quality sports such as PAC 10 and Big 12 football and ACC basketball. “Sometimes conflicts are inevitable, and they are going to happen,” Thompson says. “But we’ve done a pretty good job identifying certain times and days of the weeks when the regionals know that’s probably going to be a network window.” Having access to content from 20 different networks — and the personalities and analysis from the various regions — can also be a huge boon. Greenberg is hoping to take material contributed by the various regional networks as fodder for a news show focusing on the hot issues of the day, possibly in the 6 p.m. to 10:30 p.m. slot. The show, tentatively called Airwaves, is being tested Friday afternoons on Best Damn Sports Show; Greenberg expects it to launch in mid-November. “Usually we push stuff out to them,” he says of the regionals. “Now they are going to be helping us, because there is an amazing amount of talent when you think of how many pro teams we have.” In the past, FSN’s programming philosophy was “let’s make a lot of it, let’s make it cheaply and let’s run it to death,” says Greenberg, whose single-minded focus these days is to develop new shows for the network’s 4 to 7 p.m. block and its Sunday night and 10:30 p.m. weeknight slots. Behind this was the realization that the networks’ bread and butter was the games. He says he sees no reason why FSN shouldn’t be able to launch a great program on the back of a regional news show that garnered a 2.4 rating following, for example, a St. Louis Cardinals game. Greenberg says that he and his VP of development, Zig Gauthier, have to be nimble. He cities the recent example of the Nelly and Marshall Faulk reality show that ran on Fox Sports Midwest. Within the span of two weeks, the first show was proposed, approved, produced and aired. Coming out of the lead-in regional news, the show held almost 50% of the audience. “Our job here is to help the regions develop shows they want to access,” he notes. “Once we have a show that we think has a ‘wow’ factor, we get out and promote it.” On the advertising front, the biggest issue in the earlier years was “we didn’t run schedules well,” says Kyle Sherman, EVP of national sales for the network. “We were pretty sloppy in the back room, we didn’t have an operating system, we had advertisers who would come in for a year and they’d check us out and they’d leave because they didn’t like their experience and we didn’t prove the value of what we had.” When he joined the network in 1997, Sherman overhauled the advertising sales teams and introduced the Donovan data system, which integrates with the traffic department and helps the networks run clean advertising schedules. When he started there were 220 active advertisers; there are now about 800. Advertising accounts for 25% of FSN’s revenue, affiliate fees about 75%. Advertisers such as Bank of America and Microsoft’s Xbox have recently expanded advertising buys from a regional basis to incorporate more network sponsorships. In addition to exposure, advertisers wants ratings — and that makes Greenberg’s mission to develop new hit shows more urgent. Although Best Damn Sports Show had one of its best ratings weeks of the year Sept. 29 through Oct. 5, with an HH rating of 0.92 with 683,000 households, overall ratings for the network are down 8% to 10%. Now that’s pressure. When Comcast speaks, folks listen. So naturally, when Comcast Cable president Steve Burke told a Washington, D.C., cable confab last week that the biggest cable operator was planning to start a digital sports tier, a lot of ears pricked up. But that’s not all Comcast is planning. The company is looking to bulk up on its investments in regional sports networks and has reportedly been talking to the dominant pro sports teams in Chicago about becoming involved in a regional sports service there. Eliminating the middleman — the regional sports network that produces games for a team, sells advertising and negotiates carriage agreements with distributors — seems all the rage among sports teams these days. The New York Yankees and New York Nets, the Kansas City Royals and Minnesota Twins are just a few of the teams that have started their own networks. Over the past years, cable operators, namely Comcast and Cox Communications, have successfully started their own sports networks. In fact, the short history of the cable industry is littered with examples of regional sports networks. Regionals exploded in the late 1980s, as the number of basic cable customers ballooned to over 52 million in 1989 from just under 18 million at the beginning of the decade. Some have made it, like the New England Sports Network, which is now majority-owned by the Boston Red Sox, but many more have not. “You’ve now got…teams that have equity stakes in their regional sports networks, and I wouldn’t be a bit surprised to see others attempting to do the same thing in the future, whether it’s in partnership with a cable operator, Fox or both,” says John Mansell, a senior analyst at Kagan World Media. “I think there is finally recognition now that after 20-some odd years of regional sports networks it’s not the risky venture that it was in the early 1980s. But as the Portland Trail Blazers discovered last year and as the Minnesota Twins are finding out right now, it’s still not that easy to get a team-owned regional sports network off the ground — not to mention turn a profit. Unable to secure carriage from AT&T Broadband, then the cable operator in the area, the Trail Blazers shuttered their Action Sports Network in late 2002 after 16 months. Victory Sports One, the Twins’ network, will launch this Friday (Oct. 31) with no significant a carriage agreement with a major MSO. For a single team, starting a network can be an incredible challenge, from ensuring production is top quality — production costs will balloon as viewers increasingly migrate to high-definition sports programming — to getting ad sales and affiliate relations infrastructures in place, to ensuring viewers have something to watch in the off-season. “One of the reasons why we are able to make any money out of this is because we have an economy of scale — not only in terms of programming but in terms of management, production facilities, leasing production trucks and satellite time and all those things,” says Bob Thompson, president of Fox Sports Networks. A single team that wants to start a network has to figure out what to program all year. Team owners also must bridge the gap between what the distributor wants to pay for a fledging network — around a buck a sub for placement on a digital tier — with what the network itself wants — two bucks a sub on a basic tier. “These things are real simple to talk about,” Thompson adds. “It’s obviously much more difficult to actually do.”
— MS Highest-rated events in local markets in the past 18 months