How Rupert Murdoch Outfoxed Larry

Tisch: Ten Enduring Lessons from the

Negotiations that Wrested the NFL

from CBS

James K. Sebenius

Working Paper 19-098

Working Paper 19-098

Copyright © 2019 by James K. Sebenius

Working papers are in draft form. This working paper is distributed for purposes of comment and discussion only. It may

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How Rupert Murdoch Outfoxed Larry

Tisch: Ten Enduring Lessons from the

Negotiations that Wrested the NFL from

CBS

James K. Sebenius Harvard Business School

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HowRupertMurdochOutfoxedLarryTisch:TenEnduringLessonsfromtheNegotiationsthatWrestedtheNFLfromCBS

ByJamesK.Sebenius,*March7,2019

AbstractAremarkable1993negotiationrockedtheworldofAmericanfootballwithaftershocksthathavedirectlyshapedtoday’sentertainmentandmedialandscapes,andevenourpolarizedpolitics.InDecemberofthatyear,RupertMurdoch’sfledglingFoxNetworkunexpectedlydisplacedlongtimeincumbentCBSasthehostoftheNationalFootballLeague’sflagshipprogramming.Fox’snegotiatingsuccessseemedmostunlikelygiventhatCBShadregularlyrenewedtheseNFLrightssince1956,enjoyedagoodrelationshipwiththeNFL,sportedanacclaimedbroadcastunit,andhadaffiliatesinvirtuallyallimportantU.S.markets.YetacquisitionoftheseNFLrightsdirectlyenabledtheexpansionFox,thenaminorbroadcaster,intothemediabehemothoftoday. Formanyobservers,Fox’sNFL“heist”lookedliketheresultofasimplemove:FoxofferedmoremoneythanCBS.Acloseranalysis,however,suggestsafarmorecomplexrealitywithtenbroaderlessonsfornegotiatorsfacingchallengingsituations.Keywords:Negotiation,Bargaining,Sports,Football,Media

Barelyaquarter-centuryago,inDecember1993,aremarkablenegotiationtectonicallyrockedtheworldofAmericanfootballwithaftershocksthatdirectlyshapedtoday’spolarizedpolitics.Atthetime,thiswasanimportantnichedeal,buthardlythekindofnegotiationthatdominatedheadlinesofthedaysuchasthediplomatictourdeforcethatpeacefullyunitedGermanywithinNATOin1990aftertheBerlinWallfellorJamesBaker’svirtuosocoalitionbuildingoftheforcethatkickedSaddamHusseinoutofKuwaitayearlater.RatherthiswasthebusinessdealthatvaultedthefledglingFoxnetworkfromitsstatusatthetimeasaminorplayer,farbehindtheBigThree—CBS,NBC,andABC—tothehugelyinfluentialroleitnowplays.InthewordsofajubilantRupertMurdoch,immediatelyafterwinningprimerightstobroadcastgamesfromtheNationalFootballLeague(NFL),“We'reanetworknow.Likenoothersportwilldo,theNFLwillmakeusintoarealnetwork.Inthefuturetherewillbe400or500channelsoncable,andratingswillbefragmented.ButfootballonSundaywillhavethesameratings,regardlessofthenumberofchannels.Footballwillnotfragment."

*JamesK.Sebenius(jsebenius@hbs.edu)istheGordonDonaldsonProfessorofBusinessAdministrationattheHarvardBusinessSchool,DirectoroftheHarvardNegotiationProjectatHarvardLawSchool,andmostrecently,co-authorofKissingertheNegotiator:LessonsfromDealmakingattheHighestLevel(HarperCollins,2018).IgreatlyappreciatetheenthusiasmforthisarticlebyBrianCurtisalongwithhisusefulsuggestionsaswellashelpfuladviceofAlexGreenoftheHarvardNegotiationProject.

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WhetheronecondemnsFoxNewsastheassassinofAmericandemocracyorpraisesitasthesalvationoftheconservativemovement(orboth!),thisepisodealsobrimswithinsightsaboutnegotiationandbidding.Theselessonsapplywellbeyondthemediaworldtoamuchwiderrangeofindustries,especiallywhereaseriousoutsider,thoughtheunderdog,challengesalongtimeincumbent.Idolizedanddemonized,RupertMurdochasanegotiatorofthisdealrewardscarefulstudy.Havingstudied,advised,andworkedwithmanyoftheworld’sbestnegotiators,IhadneverexaminedanyofRupertMurdoch’snegotiationsindetail—untilIrecentlyreadaterrificarticle,TheGreatNFLHeist:HowFoxPaidforandChangedFootballForever,byBryanCurtisandpostedontheringer.comonDecember13,2018.Curtis’srivetingaccount,whichrunsto18,000+words,mostlyconsistsofanoralhistorybykeyplayersonallsides.OnepartofhisstorydetailstheprocessbywhichRupertMurdochandhisfledglingFoxnetworkmanagedtowrestkeyNFLrights,thecrownjewelofU.S.televisionsports,awayfromCBS,theincumbentsince1956.ReadingthisportionofCurtis’sarticlestimulatedmetothinknotaboutfootball,media,orpolitics—orthelaterstoryofFoxanditsburgeoninginfluence—butaboutthestrategiesandtacticsofthenegotiationitself.(Inlaterpartsofhispiece,CurtisdescribestheshockoftheCBS“losers”andhowlegendarysportscasterJohnMaddenandotherfigureswereluredtoFox.Humaninterestaboundsforfootballfansinthewholepiece,butmyfocusisnarrower.Iurgeanyoneinterestedtoreadthefullarticle.)HowdidFox,anupstart,pulloffthisdealduringanine-monthperiodbeginninginDecember1993whentheoldTVrightscontractswereexpiring?Simplisticexplanation:FoxwroteabiggercheckthanCBSwhentherightscameupforrenewal.Forcasualobservers,Murdoch’soutbiddingtheotherguyisthebeginningandendofthestory.Forsavvynegotiators,hishighbidwasthekeypieceofamuchlargerstrategy.AsI’lldemonstratebelow,abiggercheckwasnecessaryforFoxbutlesscertainbyitselftohavebeensufficient.OtherinsightfulmovesbyMurdochgreatlymagnifiedthechancesofvictory.Thefullerstoryholdspowerfulimplicationsforthose,especiallyoutsiders,whonegotiateandbidforassetsofallkinds,aswellasforpotentialdefendersandsellersofthoseassets.Thisepisodefromthe1990smayseemlikeancienthistory.Yettoday’stechbehemoths—especiallyApple,Amazon,Facebook,andNetflix—increasinglyseethevalueofcompelling,originalcontentlikeprofessionalsports.Oneormoreofthem

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maysoondotoFoxandtoday’sotherNFLincumbentswhatFoxdidtoCBSin1993.Staytuned.Inmyaccountbelowthatillustratestenlessonsaboutthenegotiatingandbiddingaspects,IrelyheavilyonCurtis’sopusfortheoverallstory(andhegraciouslyclarifiedandaddedsomekeypointsinanemailexchange,forwhichI’mgrateful).Manyquotesbykeyfiguresaredirectlytakenfromhisreportingandlinkedbacktoit.Thesituationandthechallenge.Asthestorystarts,thethreemainnetworkseachhadapackageofthemainNFLgames:CBShadtheNFC(theNationalFootballConference),NBChadtheAFC(theAmericanFootballConference),andABChadMondayNightFootball.Tworelativelyminornetworks,TurnerandESPN,sharedwhatwerethenlessvaluableSundaynightgames.(SeeFigure1.)

Since1956,CBShadhostedtheNFCdivisionoftheNationalFootballLeague,generallyregardedasthemostvaluableassetinTVsports,andhadthecelebratedanalyst,JohnMadden,inthebroadcastboothduringgames.Fox’stargetdeal:towinthisassetandleverageittobuilditselfintoafarmorepowerfulnetwork.Foxwasthenanupstartfacingseeminglyimpossibleodds.Ithadbeenregardedasthe“coat-hangernetwork”sinceover85%ofitsaffiliatesbroadcastonUHFversusVHF,thedominantTVformatatthetimeforABC,CBS,andNBC.“Coathanger”derisivelyreferredtowireandtinfoilwould-beviewersallegedlyhadtoattachtotheirTVantennas(“rabbitears”)totuneinUHFstations.ManyTVmarketsdidn’tevencarryFoxin1993.AchievingthistargetdealwasadauntingtaskforFoxasTracyDolgin,Fox’sEVPofmarketing,said“Nomatterwhatanybodysays,thiswasaHailMary.Wedidnotexpecttowin.”NFLCommissionerPaulTagliabueoutlinedtheprocesstowintheexpiringTVrights.TheserulespermittedFoxtoplaceasinglebidonCBS’sandNBC’sSunday-

Figure1

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afternoonpackages.IfFox’sbidwasthehighest,CBSand/orNBCcouldthenchoosetomatchFox’sbid,endingthenegotiation.ButevencominginasthetopbiddermightnotdothetrickforFoxgivenexistingrelationships,Fox’srelativelysmallbroadcastfootprint,andotherfactors.SohowwouldIcrystallizeMurdoch’skeystosuccessinacontestlikethis?Intheaccountthatfollows,I’veusedboldtypetogeneralizethebroaderimplicationsofMurdoch’sapproachfornegotiatorsandbidders.Tostart,herearesomeobviousandstandardpiecesofadvicethatareoftenignored,butthatthisepisodeclearlyillustrates:

1)Developabsoluteclarityonyourowninterestsandstrategicobjectives.2)Carefullyassessyourcompetitorsandcounterparts—theirmotivations,interests,stylesandothercharacteristics.

WhatwouldsuchplayerassessmentshaverevealedtoMurdoch?

First,relativetohispredecessorandCBSfounderWilliamPaley,whohadheldontotheNFCrightssince1956,then-CBSCEOLarryTisch,whosefortunehadlargelycomefromtheaters,wasmorefocusedoncostfactorsplusadrevenuewithitsimplicationsformarginsthanonthevalueofbrandingandthepowerofuniquecontentliketheNFL.The1990-91recessionheightenedTisch’sconcern:“NowayIamgoingtolosemoneyontheNFL!”RunbyCapitalCitiesandGE,respectively,ABCandNBCalsofocusedoncostcutting,butintheviewofMurdochandhisteam,notasintensivelyasTisch.

GivenCBS’slong-timeincumbencywiththeNFL,Tischwouldsurelyhavebelievedthathisnetwork’spositionwassecure.HehadroutinelyheardfromtheLeaguethat“othernetworks”mighttrytodisplaceCBS,butasthelongtimeholderoftheserights,hadnottakenthese“threats”seriously.WithrespecttootherpotentialbuyersoftheprimeSundaypackage,NealPilson,CBSSportspresidentdismissedthispossibility:“Now,theleaguehasalwaysdonethattous.Neverinathreateningway,butinanoffhand,casualway.‘Oh,ifyoudon’twanttopaytheprice,wemighthavesomebodyelseinterestedinyourpackage!’”

Second,PaulTagliabue,inhisfifthyearasNFLCommissioner,haddecidedtochangetheTVrightsgamefromtheapproachofhislongtimepredecessor,PeteRozelle,asnewcontractsbecamedue.BasedonthehugejumpinthevalueofSundaynightfootballgameswhentheTurnernetworkwasaddedtothemix,Tagliabuehadmadeacriticalobservationaboutbidding—whichiswellworth

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remembering.Henoted“Ifyouhavethreepackagesandthreebidders,you’renotgoingtodoverywell.It’slikemusicalchairs.Youalwayshavetohaveonemorepersonlookingforseatsthanyouhaveseats.Whenyoubroughtnewplayerstothetable,itwasadifferentsetofnegotiation.Allthenetworksunderstoodthat,exceptmaybeCBS.”Third,JerryJonesandPatBowlen—newownersoftheDallasCowboysandDenverBroncos,respectively—hadleveragedthemselvestobuyintotheNFLandweredeterminedtomaximizethefinancialreturnfromsellingbroadcastrights.Comparedwithold-lineowners,whooftenhadpersonalaswellaseconomicmotivesforhavingacquiredteams,JonesandBowlenhadstrongerfinancialmotivesandmuchlesssentimentalattachmenttoorrelationshipwiththenetworks.Arevealingepisode:whenthenetworkswereapparentlylosingmoneyastheeconomysoftened,longtimeownerArtModelloftheClevelandBrowns,confidentinhisabilitytodeliverold-lineowners,suggestedthatsomerightsmoneyberefundedtothenetworks.Outraged,JerryJonesandPatBowlenworkedtirelesslytopersuadeenoughownerstosuccessfullyblockthisinitiative.TagliabuesooninvitedthetwoontotheTVrightscommittee,indicatingashiftinpowerdynamicsamongtheownersfromoldtonew.Fourth,RupertMurdoch,aswashbucklingAustralianmediamogulwho,afterlargelydominatinghishomemarket,hadmadeboldmovesabroad.By1990,beforetheNFLepisodeorhislaterpurchaseoftheWallStreetJournal(in2007),hisholdingcompany,NewsCorp,hadacquiredBritain’sNewsoftheWorld,TheSun,andTheTimes,hadformedEuropeanmediaconglomerateBSkyB,andintheU.S.hadacquiredHarperCollinsandTwentiethCenturyFox.MurdochhadtriedtobuyNFLTVrightstwicebefore,in1987and1990,butbelievedthattheNFLhadnottakenhisbidseriously.InsteadhethoughttheLeaguemainlyusedhisinteresttoprodthemajornetworkstoincreasetheirbids.Fortheupcoming1993round,however,MurdochcalledJerryJoneswhorecalledrecently:“[Rupert]said,‘Jerry,IthinkIwasastalkinghorselasttime.I’mnotgoingtodothatandbejustastalkinghorse.’”Jonescontinued:“Isaid,‘Mr.Murdoch,Iwasn’tapartofthatnegotiation.ButIam[in]thisone.’”Murdochclearlyrecognizedtheimportanceofanewkindofplayerwithdifferentmotivations.

HadtheBigThreenetworks,especiallyCBS,similarlyassessedtheirnewpotentialchallenger,theywouldhaveseenthatRupertMurdoch,visionaryfounderofFox,characteristicallyzoomedouttothebig,strategicpicturetodeeplyunderstandhisowninterests.InBryanCurtis’swords:“UnlikeCBS,Foxwasn’tmuchworriedaboutlosingmoneyonfootball.AsMurdochwouldlaterboast,heregardedthepriceof

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NFLrightsasthepriceofbuyinganetwork—andwhateverhepaidtheNFLwouldbecheaperthanbuyingCBSorNBCoutright.”FoxVPGeorgeKrieger:“Whenhedoesadeal,Rupert’sthinkingabout,‘What’sthisgoingtolooklike10yearsout,20yearsout?Willthishelpmebuildanetwork?’Theotherguysaretryingtomanagefinancialsforthenextquarterlyfinancialreport.”FoxEVPChaseCarey:“Youweren’tgoingtomakemoneybuyingtherights.Whatitwasgoingtodowasgiveyoumomentumtobuildthebusinessaroundthoserights.”(Figure2isamapofthemainpartiesandwhereMurdochandTischfocusedtheirefforts.)

Thestandardadviceinthefirsttwolessonsabove—toknowyourownobjectivesandassesstheotherside(s)—isessential,butinsufficient.Theabovepartyevaluationsuggeststwovitalextensionsoftheselessons:

3)Inassessingthe“otherside(s),”don’tthinkofthemasmonolithicasifyouwillbenegotiatingwith“CBS”orthe“NFL.”Rather,probefortheviewsandinterestsofdistinctindividualsandinternaldynamics.

4)Beespeciallycarefultore-assessthesefactorswhentherearenewplayersinthegame,and/orcircumstanceshavechanged.

Aswe’llseebelow,hadMurdochnotsussedoutthedifferentfactionsandchanginginternaldynamicsoftheNFL,hewouldnothavehadthebasisforhisultimateapproachtothenegotiations.AsNBCSportsPresidentDickEbersolobserved,“ThekeytothosenegotiationsmorethananythingelsewasPatBowlenandJerryJones.ThereneverwouldhavebeenaFoxnetworkifthetwoofthemhadn’tstoodupandrepudiatedModell.”HadMurdochthoughtintermsofamonolithic“NFL,”andmissedthosevitalinternalnegotiations,hewouldnothavehadthebasistousethisnewsituationtohisadvantage.

Figure2

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5)Useyourassessmentofthesenewplayerstounderstandtheirdistinctinterests,valuations,andlikelystrategies.

AnassessmentofLarryTisch,atthehelmofCBS,wouldhavesuggestedhowhisbidwouldbedetermined,givenTisch’sshort-termfinancialfocus.IntheexpiringNFLrightscontract,CBShadpaid$265millionforthepremierNFLpackage(theNFC).Withtherecession,however,CBScalculatedthatbreakevengivenadrevenuegoingforwardcouldonlyjustifyabidof$250million.Tischmandatedthathisteampresentthatnumber,a$15millioncut,totheNFL,pleadingpoverty.

NotonlywasCBS’sNFCpackagethemostvaluable,bothfinanciallyandfornetwork-buildingpurposes,butamongtheBigThreenetworks,MurdochandhisteamjudgedthatmiserlyTischwasthemostfocusedoncuttingcosts...andhencethemostsusceptibletoanaggressiveFoxbid.

Yetrelativetothead-revenuedrivenincumbents,theaboveassessmentofthepartieswouldhaverevealedFoxasadetermined,smart,wealthyupstart.ItwouldhaveshownanNFLcommissionerandnewownerswhowereallfocusedonextractingincreasedrevenuefromthenetworks.Together,thesefactorsimpliedarealopeningforFoxonbothsidesofthetable—theNFLandtheothernetworks—whichMurdochclearlyperceivedandcouldexploit.HadtheyprobedmoredeeplyintoMurdoch’skeyobjectiveandpaidcloserattentiontotheNFLpowershiftsbroughtonbynewplayers,thetraditionalnetworks,especiallyCBS,mighthaveidentifiedavitaldefensiveinterestinthesenegotiations.Morethangeneratingadrevenue,theyshouldhavefocusedonblockingFoxfromgettingandusingthesevaluablerightsasthecornerstonetobecomingaformidablecompetitor,andnotjustinsports.Intheirpreoccupationwithneartermfinancials,whichimpliedonlymodestbids,theyapparentlydidnotseethisrisk,orminimizedit.

6)Astheincumbent,don’tcomplacentlyunderestimateyourpotentialcompetitors,especiallyiftheyarehungry,smart,andrich—andmayseeyourindustrydifferentlyfromtheconventionalwisdom.

Besureyouunderstandtheirrealmotivationsanddon’tmerelyprojectyourownobjectivesontothem(inthiscase,forCBS,anadrevenue-drivenorientation).WithrespecttotheSundayafternoonpackagethatCBShadheld,PaulTagliabueobserved“Ithinkthey[Fox]hadrecognizedthatthiscouldbeanetwork-maker,notonlyintermsoftheFoxbrand,buttheVHFaffiliatesthatwouldswitchtoFox.”

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7)Withyourassessmentoftheplayers,theirinterests,andstrategiesinmind,evaluatethekeybarriersstandingbetweenyouandyourtargetdeal.

FromthevantageofMurdochandFox,suchanassessmentwouldhaverevealedatleastthreeseriousbarrierstorealizingtheirobjectives.

Ø TheNFLhadahighdegreeofcomfortandgoodrelationshipswithtraditionalnetworks,CBSinparticularsince1956.CBShadJohnMadden,thelegendarygameanalyst.Pastrightsnegotiationsandthesefactorsmadethecurrentincumbentsthepresumptivefavorites.

Ø MurdochandDavidHill,headofSkySportsandMurdoch’screativeheadfortheFoxNFLproject,werebothfromAustralia.HowcouldtheypossiblyunderstandAmericanfootball,almostareligioninmanypartsoftheUnitedStates?

Ø EvenifMurdochmadethehighbid,theNFLwouldstillharborseriousqualmsaboutFox,whichwasseenas“small,ricketynetwork,”withlimitedcoverageandnoAmericanfootballexperience.About60UScitieshadnofourthTVstationevenavailabletobecomeaFoxaffiliate.ThesefactorscoulddamagethevalueoftheNFLTVfranchiseifFoxwasthehighbidderandkeyrightswenttoMurdoch’snetwork.Forexample,FoxhadcreatedtheX-Files,generallyregardedasagreatshow,butsharplylimitedinitsimpactbynotbeingononeoftheBigThreenetworks,whereitwouldhavebeenvastlymoresuccessful.EvenabiggercheckfromMurdoch—thatappearedtoriskthelong-termvalueoftheNFLfranchisebycondemningfootballtotheequivalentofbroadcastingSiberia—mightnotclinchthedeal.

8)Intandemwithyourfinancialbiddingstrategy,customizeyourapproachtosurmounteachofthespecificbarriersyouhaveidentified.

Inthissituation—asa“foreigners”withoutUSfootballexperience,withspottyandoften-weaknetworkcoverage,facedwithanentrenchedlong-timeincumbentnetworkwithwidecoveragethatenjoyedagoodrelationshipwiththeNFL—Foxtailoreditsactionsinseveralwaystoovercometheseformidablebarriersandheightenitsoddsofsuccess:Ø 8a)Makeitpersonal.FoxexecutiveswenttoDallastodispelthehesitations

thattheleaguehadaboutpartneringwiththe“coathanger”network.KnowingthattheBigThreehadendlesslycomplainedtotheNFLaboutoverpayingand

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losingmoneyontheirfootballcoverage—theFoxguyswantedtocontrastthissourmessagewithawhollydifferentattitude.ItregisteredwithJerryJones:“TheNFLwasgoingtobethestaroftheFoxnetwork.”FoxExecutivevicepresidentPrestonPaddonechoedtheaspectoftheapproach"Essentially,everyoneelsewastellingtheleaguethebabywasugly,andwedon'tthinkweshouldpaywhatwe'vebeenpaying.Weweretellingthemyou'vegotthemostbeautifulbabywe'veeverseen.Noonewantstohearthebabywasugly."

Ø 8b)Offercompellingnewideasthatwilladdvalueintheeyesoftheotherside(and,ideally,beprofitableforyouaswell).ForaninnovativeapproachtopromoteandgrowtheNFL,MurdochturnedtoDavidHill,theAustralianpresidentoftheU.K.’sSkySportschannel.Hill,laterthecreativepowerbehindFoxSports,“puttogetheratape.AndIwrotethisthingup:‘ThisishowwedosoccerinEngland,andthisishowwe’lldoAmericanfootball.’”ThereactionofDallasCowboysownerJerryJonestothetape:“ThecommitteememberswereshownatapeofaSkySportstelecastofaFirstDivisionsoccergameinEnglandthequalityoftheproductioncomparedfavorablywiththatofanyNFLgameonU.S.television.”FoxVPGeorgeKriegerelaborated:“[David]Hilljustkilledit.Hesaid,‘Attheothernetworks,theAandBgameshavesevencamerasandtheresthavefive.We’llhaveaminimumofsevencamerasateverygame,andthebiggameswillhave12cameras.We’llhavemoreangles,morefortheviewers.’Hetalkedaboutaudio.‘TheexcitementintheNFLisitssound.’And‘Whyistheleagueonlymarketedsixmonthsayear?AllourFoxstationsweregoingtopromotetheNFL12monthsayear.’”Fox’syear-roundNFL-relatedprogrammingwouldincludeachildren'sshow,andinternationalopportunities.AccordingtoJerryJones,"Theytalkedaboutusingourplayersonthenetworkalot,maybeevenontheirshows." His overall judgment: “Iwasjustmesmerizedbytheirimaginativethinking.Theywerechangingthepresentationofthegame.”

Ø 8c)Creativelyaddresscoreobjections.Fox’sspottycoveragedeeplyworriedtheNFL.InAsPrestonPadden,FoxBroadcastingpresidentofnetworkdistribution,explained,“Therewereabout60citiesintheUnitedStateswheretherewasnofourthTVstationtobecomeouraffiliate.”Paddencontinued“CBSwassayingtotheNFL,‘IfyoumovetheserightstoFox,inthese60citiestherewillbenofreeover-the-airbroadcastoftheNFL.’IffootballwenttheFoxforthenextfouryears,theNFLownershadaverydeepconcern:sincethemostvaluableNFLpackagewouldnotbeavailableinatleast60citiesandonlyonaweaknetworkinmanyothers,bothviewership,addollars,andthebrandwouldsuffer.ButRupertMurdochhadaplan,tellingPrestonPaddenthat‘YougottocometothismeetingwiththeNFLTVcommittee.’Mr.Murdochdidnottellmewhathewasgoingtosay.WestandupinfrontoftheTVcommittee,andhesays,‘Within60days,PrestonwillgetasecondaryaffiliationwithsomeTVstationineveryoneofthese60markets.’Ijustaboutwetmypants.”Tothesemajor

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networkaffiliates,thefearoflosingtheNFLandthelureofgettingitbackviaasecondaryaffiliationwithFoxwouldbepowerfulindeed.SoFox’scommitmenttoatleastsecondaryaffiliationandgreaterVHFversusUHFbroadcastingservedtogreatlyassuretheNFLexecutivesandowners.

Ø 8d)Tailorthefinancialaspectofyourbidtoyourstrategicobjectivesandtheseller’slikelysituation.DespitetheotherappealingelementsofitsapproachtotheNFL,MurdochconcludedthatFoxwouldalsoneedtoofferashockinglylargeamountofmoney,a“knockoutbid,”suchthatCBSwouldnotexerciseitsmatchrights.Fox’sPrestonPaddenexplained:“Thefinancepeopleandthesalespeopleatthenetworkgottogetherandsaid,‘OK,howmuchcanwepayfortheserights?’Theydidananalysisofwhatkindofadvertisingtheycouldsellandcameupwiththemaximumbreak-evennumber.ThenMr.Murdochcameboundingintotheroomandsaid,‘Whatdowehavetobid?’Wetoldhim.Hesaid,“That’snotenough.TheNFLdoesn’treallywanttheirgamesonournetwork.They’rejustusingustobidupCBS.[emphasissupplied]I’vegottobidCBSawayfromthetable.”FoxEVPChaseCareyelaborated:“Youhadtohaveanumberthat—Idon’thaveabetterwordforit—madethemchoke.”Murdochidentifiedthatkillernumber:Foxwouldbid$1.6billionfortheNFCrightsoverfouryears.”Inhisaccount,authorBryanCurtisputthatamount—$400millionperyearbyFoxrelativetoCBS’sroughly$300millionannualbid—inperspective:“In1993,itwasanastonishingfigure.”(ThealignmentoftheNFLfactionswithMurdochattheendoftheprocess,withTischleftout,isrepresentedinFigure3.)9)Especiallyasanunderdogchallenger,don’tassumethatahigherbidbyitselfwillwintheasset,especiallyifthereareotherimportantinterests.

WecanneverbesurethatabiggercheckbyitselfwouldnothaveclinchedthedealforMurdoch.Yetalongwithhishigherbid,hisothermovesinthenegotiation,surelyimprovedhissuccessodds.Recallsomeoftheseothermoves:contrastinga

Figure3

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football-positiveFoxwiththeBigThreewhowereendlesslycomplainingaboutthecostoffootballrights,presentingcreativeideastobroadentheNFL’sappeal,andcrediblypromisingdozensofsecondaryaffiliationsinnon-Foxmarkets.Wouldahigherbidhavebeensufficient?Bothsidessayno."Thereisnoquestion,"saidMurdoch,"thatifCBShadbeen$20millionlowerthanus,theNFLwouldhavetakenCBS."AndNFLownerJerryJonesthendeclared,"CBShasgiventheleague38yearsandagreattradition,andwepreferredtheincumbent.WehandicappedFox;theyhadtobesignificantlybetter.Buttheywere.Thetypeofcommitmenttheygaveus,wefelt,wasaboveandbeyonddollars.Theysaid,'We'lltakethisentity,theNFC,andbuildournetworkaroundit.'It'satremendouscommitmentontheirpart,andwejustcouldn'tlookpastit."

10)Ifyouaretheincumbentandhavethechancetopreemptaformidablechallenger,actfast!

CBSSportsPresidentNealPilsonhadprivatelycorneredNFLCommissionerPaulTagliabuetheweekbeforethedeadlineandpressedhimforinformation:“IhadaskedPaultostepoutsidethestudioforaminute.“Paul,what’sthenumber?Whatdoweneedtodohere?Whatisthenumberwereallygottogettotomakethiswork?”Hesaid,“$295million...Ithinkifwehadclosedat$295millionearlyintheweek,thatwouldhavebeenover.Thatwaskindofthetragedyofthewholething.Wehadthatnumberallweek.Allwehadtodowassayyes.”That$295millionwouldhavebeenfortheprimeNFCSundaypackage,notthesecondaryAFCone.JayRosenstein,CBSSportsvicepresidentofprogramming,pointedupthepainfulironyofthischoice:“fouryearslater,whenCBShadnewmanagement — Tischwasgone — theypaid$500millionfortheweakerpackage.Fox’smarketingVPTracyDolginsummedthelongerramificationsofthisepisode:“If[Murdoch]didn’tmakethatbetontheNFL...I’msureofonething:...FoxNews,FX,NatGeo — thecableempirewouldn’thavebeenthere.I’mnotsurethatthiswholeempirewouldn’thavebeenthere.…Allofthatistracedbacktothisbet-the-farm,multibillion-dollarHailMarytogetNFLrights.BecauseNFLrightsweretheonlythingthatwasgoingtogethimnewstations.…Look,hejustsold[thestudio]for$70billion.†Iguessitwasthebest$400millionheeverspent.”

***

†TheJune2018salefromMurdoch’sNewsCorptotheWaltDisneyCompanyincludedFox'smovieandTVstudios,theFXcablenetworks,andtheFoxregionalsportsnetworks.OtherRupertMurdoch-ownedassets,suchasFoxNewsandtheFoxTVnetworkremainedwithNewsCorp.

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WhileI’veofferedthesetenlessonsinthecontextofRupertMurdoch,Fox,CBS,andtheNFL,theyresonatewiththeexperiencesofotherformidablenegotiatorswithwhomI’veworked,studied,and/orwrittenabout.TheserangefromMicrosoft’sBillGatestofinancierBruceWassersteinandtoformersecretaryofstate,HenryKissinger,amongmanyothers.CuttingthroughthisNFL-CBSsagaandthesetenlessonslurkasimplebutpotentcautionandanabidingtruth.Simplecaution:failuretoreallyprobeandunderstandtheinterestsoftheotherside—andseriouslytakethemintoaccountinyourapproachtothenegotiation—canbedamagingorevenfataltoyourside.Withoutidentifyingtherealbarrierstoadealandcustomizingyourapproachtoovercomethem,yoursuccessoddsarelow.Thiswarningespeciallyholdswhenonesideoverconfidentlydismissesthecompetition,focusesontacticsandtheshorterterm,likeTischatCBS—whiletheotherside,likeMurdoch,isastrategicnegotiator,carefullyreadinghiscounterparts,andplayingthelonggame.Abidingtruth:whileMurdoch’ssuccessdependedonhisimpressivenegotiatingstrategyandtactics,hisapproachonlysucceededgivenhisdeep,almostuniqueunderstandingandconvictionaboutthelongtermvalueofprofessionalfootballtobuildupFoxasanetwork.Virtuosotacticsinserviceofaflawedunderstandingofthevalueatstakecannotsucceed.