When March Madness heats up next month, inevitably a college basketball point guard will make a steal and go down and score on the other end, prompting an announcer to say the kid can play on both ends of the court. And for David Levy of Turner, which is about to carry the NCAA tournament for the first time, that description also rings true.
As head of Turner Sports, Levy oversees an outfit that just added March Madness to a portfolio that includes assets like the streaking NBA and Major League Baseball, and is always mentioned when big properties like the Olympics come available. But he is also in charge of generating revenue for Turner—both in the form of ad sales and fees from cable, satellite and telco affiliates for its cable networks TNT, TBS, truTV, Cartoon Network, Adult Swim and CNN, as well as the company’s many digital properties.
So dealing with everything from Conan to NASCAR, Levy, president of sales, distribution and sports for Turner Broadcasting, has a window into several aspects of the business. Just before leaving for the NBA All-Star Game last week, he sat down with B&C Business Editor Jon Lafayette for a wide-ranging conversation, an edited transcript of which follows.
Do you have March Madness yet?
We’ve got March Madness. First of all, you only can imagine what the challenges could have been with two different media companies, two different cultures sort of getting together for the first time. [Turner and CBS together will televise every game during the tournament.] And I have to say, it has been phenomenally over all our expectations on how great the communication has been, how incredible the sales organizations have worked together. We’re pretty much sold out on the linear side, we’re pretty much sold out on the digital side.
The digital side, that’s March Madness on Demand?
March Madness on Demand. Well now it’s Madness by Turner, but yes, we’re working with them on sales, and so forth and so on. All the digital business moved to the Turner side. Not only March Madness on Demand, but we’re also representing NCAA.com and the 88 other championship sports that are associated with it. So all of our expectations have been surpassed not just relationshipwise, but even on the revenue side of the business.
By how much is revenue up?
I’m not going to talk about finances, but I will say it surpassed our expectations in year one of our model.
And how does that work in terms of pricing? Do you and CBS have the same pricing levels whether it’s a spot on CBS or elsewhere?
Doesn’t matter. Same CPMs on truTV as there are on CBS, because it’s about the tournament.
So that’s a huge win for you, anytime you can get those kind of prices on cable.
Let’s take a really honest assessment of sports right now. There’s no difference between the NBA CPMs on ABC or ESPN or TNT. If there is, it’s slight. Sports CPMs across the board are pretty much equal, whether it’s broadcast or cable. You can say that in news, you could probably say that in kids. The only genre that still has that “differential” is entertainment. And Conan was the first to break even that. And so, as more original programming comes on, whether it’s FX, or USA or TBS, as original programming comes on, you’re going to see that gap close as well. But there’s still a gap in entertainment, because we don’t have the depth of original programming. There’s still acquisitions, right? So we’re still running Bones and things of that nature that don’t require the same CPMs as original programming. So the gap in entertainment is still a little bit there, but I think that’s closing.
Are you interested in the Olympics?
Certainly the programming works, but I don’t know if the financial model will work. If the numbers are what they were in the past, I don’t think it can. I’ll put it that way.
Broadcasters are now getting cash retransmission payments. How does that affect how much you can get for your cable channels?
Let’s not forget, these broadcast networks were getting retrans money forever. They were launching small cable networks instead of taking retrans money. And I don’t know if those networks will survive, now that they’re shifting their focus back to the broadcast networks. And maybe that could be a good thing or a bad thing, I don’t know which networks and how that works. I’ve never said I hope broadcast networks go away. In fact, we need broadcast networks. We need them [for] acquired programming. And I actually feel that the depth of comedies and dramas that are out there today for us to acquire are smaller than they’ve even been. And I think that has a lot to do with them coming out with reality programming, and things of that nature that doesn’t really sell well in secondary markets. So to me, I’m hoping they reinvest this money back into the programming which then in turn will help television continue to grow.
Is there value in digital? You guys are pushing content and TV Everywhere. Is there incremental revenue there?
We’re not truly in a sense charging for TV Everywhere because in essence what we’re saying to our cable partners, our satellite partners and our telco partners is, we believe if you’re paying us, the consumer should be able to get it anywhere on any platform he may want, as long as you authenticate it. I mean, they’re paying for it, right? Why should they have to pay per device?
Does that apply to mobile as well? There’s a lot of talk out there that consumers are willing to pay more for mobile, particularly when it comes to access to sports.
It depends what kinds of rights you acquire with that and so forth. But I will say that as we go into new sports rights deals, we look to acquire all rights for all platforms. And if we have those rights, we will pass them along to our partners.
And you’re increasing the amount of content that’s going to be on video on demand, on the Website?
Almost tenfold. Meaning the amount of content. Because now we’re in the authenticated fold.
Are you making any plans to sell the content that’s outside of the authenticated window covered by C3 ratings?
It’s a little early to start talking. It’s a little bit of a long tail there, but where I think the opportunity is is on the advertising side. What we’re really talking about in the authenticated window, just so everybody’s aware, is we’re talking about long-form programming. We’re talking about the half-hour comedies and the hour dramas. But highlights, clips, and all that is still going to be in the unauthenticated windows. You’re still going to be able to see clips of Conan and clips of highlights of football and basketball.
Can you get sponsors for clips? Is that a significant business?
Sure, absolutely. Yeah, and growing. And as far as incremental revenue to the bottom line of our company, it’s probably our largest growth area we have. Now again it’s small, so when you talk percentages it’s large but at the same time, the majority of our revenue still comes from subscription and ad sales for our television business.
You’ve got both advertising and distribution revenue under your purview. Which one do you think is going to be growing faster in the next 12 months?
They’ve been pretty equal as far as half and half in this company, and I still believe that.
You’ve been ramping up the amount of original programming, and getting premium prices for it. Is that something else that you’re going to do more of?
Yes. We are dedicated to building our original programming up on both TBS and TNT and truTV. All three of our networks are investing heavily in original programming because of [three] things: Brand recognition, ratings, and CPMs.
In terms of original programming, with Conan there’s been a little bit of softness in the ratings lately.
First of all, the demographics are tremendous. And he did take some time off I think in late December/early January which swooped back in, but I think he’s coming back. He’s got a very, very strong place and we are ecstatic with Conan’s delivery and the attention the advertisers are giving it.
Are there other metrics that people are buying that you are able to sell and monetize?
It’s hard to guarantee anything of that nature. But are we working with clients to get results to work together that we’re not publicizing all over America? Yes. But we’re in the learning stages, because a lot of this new technology and a lot of this new research isn’t ready for mass distribution.
The agencies don’t seem to have a whole lot of money to invest in research. The clients can only do so much of that stuff themselves. Is i t incumbent on you guys to prove that advertising in media works?
It’s a challenge, it’s certainly a challenge. They look to us for guidance. There are agencies out there that do invest and work with us on research, and they’re not backing off because they also have to invest for their clients.
In its fourth-quarter earnings report, Time Warner said that CNN’s revenue was down. That’s the first time I can remember hearing that. What are you doing to fix it?
You know, CNN, I want to start off by saying that CNN is still one of the most dominant brands out there in news. It’s the most reliable, trustworthy, No. 1 news leader, and people trust it. So is there ratings softness? Yeah. It’s a fair question, and you know what, I’m not trying to hide behind it. We were down. But I still believe that the brand is a strong brand, I still believe that the advertisers and the consumers still trust the brand. And I see that there’ll be an upswing.
Looking to the next 12 months, what do you see as your biggest opportunity?
The NCAA tournament I think is going to be an eye-opener for the industry. I think people are going to find out where truTV is for sure. But I also think the consumer is going to be in a great position to be the producer of the tournament. Never before have they been able to go to any channel they want to see all games on a national basis. Everything just used to be on CBS and they would tell you what games you would go to, you couldn’t control it. All the games are going to be on national.
What’s the thing that keeps you up at night, what’s the challenge?
Balancing what the consumer wants, balancing what our cable operators and distributors want and making sure that our content is exposed to as many people as possible. And ! guring all this out as we’re going into negotiations with distributors and advertisers and so forth and making sure that, looking at what Netflix means to the company and looking at what TV Everywhere means for the company and what Hulu means for the company. So what keeps me up at night is making sure that we keep up with all the technology and that we are able to distribute our content across the platforms.
Are you surprised at how strong the market is given the economics?
You know, it's funny about the economics and the economy. You go back, almost like the middle of '09 and a lot of people thought the world was coming to an end. So what did everybody do? They reorganized their infrastructure, they closed down brands that weren't working, they set new sales targets and goals, and they put out new product lines, they were thinking about what do we need to do to change for what's happening in the world today. And then at some point you say well now we've got to sell. And what's the largest reach vehicle out there to get your message out to the biggest amount of people in the shortest amount of time? Television. And so it didn't surprise me that the television marketplace was going to be robust. Yes, 10% is unemployed, but the 90% that are employed I think feel better. If I look at indicators, and I look at options that weren't taken in probably one of the strongest upfronts we've had. I look at scatter pricing in the high 20-30% and it looks like second quarter seems to be going in that direction, I think that the marketplace will be strong for this upfront because I don't believe advertisers really want to pay those kind of prices in the scatter market.
E-mail comments to jlafayette@nbmedia.com and follow him on Twitter: @jlafayette
