In September Walt Disney’s ESPN sports network won the deal to broadcast “Monday Night Football” for eight more years at a price tag of $1.9 billion a year to the National Football League. Great news for armchair quarterbacks and sports bar owners. But who will be the losers?
According to an article in BusinessWeek, cable and satellite operators face the expensive-but-worth-it conundrum. Titled “Cable’s ESPN Dilemma: Wildly Popular—But Costly,” the article mentions the ESPN-NFL deal is rumored to be a 73 percent increase. Therefore, when ESPN deals come up for renewals with companies such as Comcast, Time Warner Cable and DirecTV, the sports network will need to ask for more money.
In making their deals with ESPN, the cable operators could pass costs on to viewers or drop the sports network; either way, they’ll lose subscribers. Not fumbling the deal with the world’s “We’re No. 1” sports network may be essential to keeping 99 million U.S. cable subscribers plunking down monthly fees.
ESPN has become a sports dynasty that enters its deal-making season with the ratings clout. Of the 20 most-watched programs ever on cable TV, 16 were episodes of “Monday Night Football,” which ESPN didn’t begin broadcasting until 2006. ESPN is the only cable channel to capture 20 million households watching a program, and it has done it four times.
Cable operators face a real challenge. No doubt the chief financial officers on both sides are sharpening their spreadsheets.
You may face a similar challenge one day with one of your deals that you cannot afford to lose.
How CFOs Can Help Negotiate Deals
Don’t have your CEO be the sole negotiator. One of the most under-utilized positions in the deal process is that of the CFO, even though organizations that regularly use their CFOs in negotiating see huge benefits and gains.
To say that having your CFO talking to your prospect’s financial people is a little obvious. The question is when? Here are some of our pointers:
1. Get your CFO involved from the opening kickoff. The CFO should be in the conversations at the initial point of engagement with any personnel from your prospect involved with finance. Procurement, Purchasing, Compliance, RFP process management and so on.
2. Never talk to the other side without your CFO. There is a lexicon that the financial personnel use that has nuances and meaning that is important to get right on the first try. If you don’t use your CFO you risk losing lots of time in the discussion trying to get your prospect’s requests met correctly. You also save yourself some of the frustration of being a carrier pigeon moving questions and responses back and forth between the two financial departments.
3. CFOs talk terms, not price. There’s an old story about an emperor who sentenced a man to death, but allowed the man to choose his form of execution. The man responded to the emperor, “I choose death by old age.” Death was the price; old age was the term. Once price has been established, then the conversation is about terms. Most sophisticated people recognize that terms are more important than price in the negotiation anyway.
4. Give someone else final say. If you put your CFO up front, then someone else has to be the final check off. CEO, the Board of Directors, outside investors…choose one. The point is that CFOs are just as likely to go through the emotional change in a deal called “Falling in love with the deal.” That is a dangerous emotion to let run without a cooler head outside of the room.
Let’s face facts. Some times the price of the deal has to go up. ESPN cannot swallow the NFL price increase, and the cable operators do benefit from the increased number of viewers. The inner game will be what terms and extras can be thrown into the deal.