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June 27, 2007

George Bodenheimer

David Levy

Adam Silver

John Skipper

David Stern

COMMISSIONER DAVID STERN: Thank you for joining us. I am extraordinarily pleased to be able to announce that the NBA, the Walt Disney Company and Turner Broadcasting have extended our relationship for an additional eight years beyond the current one year remaining in our existing six-year deals; meaning that NBA will be carried on ABC, ESPN and TNT through the 2015-2016 season.
We have an extraordinary partnership with both companies. At the end of these deals, we'll have been in business with them for an extraordinarily long period of time. We have very much profited in the growth of our game and the quality of our telecast during this last deal that we're concluding next year, and we expect enormous growth in the future nine years that are now covered by these deals.
The broadcasting landscape in terms of these will look very much the same with respect to what appears on the networks and our scheduling, and our releases will deal with that. And the contracts that we have entered into provide for an additional robust grant of digital rights to enhance the experience of our fans in ways that ESPN, ABC and TNT have done to some small degree with our properties, but will do to a much greater degree and to which they bring enormous experience based on their expansion and utilization of technology for other properties.
So we see this as an extraordinary affirmation of the value of our programming, the state of our game, so that the most important experienced and growing and digitally adept media companies in the world have expressed this degree of confidence in our players and in our game.
And that's the short story, and I turn it over to David Levy.
DAVID LEVY: Thank you, Commissioner Stern. I'd like to thank my -- I'd like to start think by saying thank you to our long-term partners at the NBA, specifically David, Adam Silver and Bill Koenig for working with us to extend our partnership into the next decade.
It's been a priority of our company to extend and expand our partnership with the league and required the dedication and teamwork of a number of my colleagues at Turner who helped make this deal possible. And while I can't thank everyone, I'd like to acknowledge Phil Kent, the chairman and CEO of Turner Broadcasting; Mark Lazarus, the president of Turner Entertainment and Jim McCaffrey, the executive vice president of operations and strategy for all of their support.
We also look forward to once again collaborating with our ABC, ESPN, our partners to help further promote the NBA.
This is truly a landmark television interactive and marketing partnership which extends Turner's successful 23-year affiliation with the NBA for next nine years and hopefully the Commissioner and I will both be around to negotiate this next deal.
From our exclusive Thursday night regular season doubleheader to All-Star Weekend to our postseason coverage, the NBA continues to be one of the foundations for Turner Sports and for TNT. This long-term partnership exemplifies our commitment to the quality of sports programming that matters to our audience, advertisers and cable operators. This partnership goes to the strength of our company as we partner with the NBA to deliver programming and content on a variety of branded platforms. The desire for sports content has not changed over the years but how fans consume it has. Now more than ever, viewers have sports content and information at their fingertips due to the growth of digital platforms, such as wireless and broadband.
Over the last few years the media landscape has evolved, and the real opportunity for media companies is how to reach and surround consumers across many touch points in every day life. The way sports has changed the television business, all these digital platforms will have significant impact on the sport marketplace and why this agreement will have even greater significance as we move forward.
Above all, I think this endeavor speaks volumes about what we have accomplished together and about the trust and respect that exist between Turner and the NBA.
Again, thank you. Here's to a successful nine years and now I'll turn it over to George Bodenheimer.
GEORGE BODENHEIMER: Thank you, David. I want to start by congratulating both the NBA and Turner Broadcasting for their deals, as well. We couldn't be more delighted to be here today to be announcing our extension of our partnership with the NBA. And I certainly want to recognize and thank David Stern, Adam Silver, Heidi Ueberroth, Bill Koenig and the staff over there for their excellent work and partnership.
I also want to recognize our own team. This was a very complex agreement, the length and the scope of it and took a lot of work. I certainly want to recognize the folks that led our efforts, John Skipper, executive vice president of content; John Wildhack, executive vice president of programming; Russell Wolff, executive vice president and managing director of international; and all of their staffs. A lot of tremendous hard work and extremely proud of the effort that our people put forth here.
I also want to recognize our CEO, Bob Iger, perhaps the leading NBA fan; one can find in his support, in not only the NBA, but our team and our negotiations. Couldn't do it without our support obviously.
This deal is a major step forward in our burgeoning relationship with the NBA. We've worked together with the NBA and their staff. Really, our interests are aligned if you think about it. We are interested in serving fans; great NBA product globally as is the NBA and our growing international businesses led by Russell Wolff are going to be primary beneficiaries of this deal, as well as this deal embracing our digital future which we'll go into together with the NBA.
It's really a very extensive package that we have negotiated here. It's really setting a -- it's really a prototype deal for sports media deals going forward, and I'm proud that we were able to achieve that in partnership with the NBA.
It fuels over 17 ESPN platforms which is detailed in our press release and really understates it because it counts ESPN International as one, and anyone who knows our business know that is our growing business throughout the world is certainly not one entity; 17 is a bit of an understatement.
I'm of course pleased with the eight-year commitment. We are in this for the long term with the NBA. Sports is cyclical; they go up and down; you get short series; you get long series, this and that. But it's an incredibly consistent property for us, and to make an eight-year commitment between the two of these is significant and speaks to the comfort we both have with each other. It's an extraordinarily strong performer and I know it's going to enhance ABC, ESPN and all of the ESPN International businesses, as well. Thank you.

Q. David, I don't know if you want to quantify the exact size of the deal monetarily, but please do that if you want to. But if not, can you say whether digital rights are worth more than broadcast rights?
COMMISSIONER DAVID STERN: I can't say, and I can say that they are not, but I can say that they are very valuable because the growth and exploration that is necessary can't take place without robust grants on the rights and robust utilization and extension of those rights.
So this is both an important broadcasting deal, but as our fans seek to experience us in different ways, and those different ways are less demonstrated by the number of streams, the number of customized highlights, the number of Video on Demand, the approach to wireless, which both Turner and ESPN have vast experience with; what you're seeing is the movement of the rights to follow the fan and to enhance the fan experience for those who really want to experience it all. But if you ask me to quantify it, I would say that we are just at the beginning of an extraordinary growth period in digital rights.

Q. And on the digital rights that you have, are you giving up some from NBA.com to grant to them as part of these deals, or are these new grants that you're able to make?
COMMISSIONER STERN: I would say that for the most part, there are 208 games being broadcast and we've given robust rights with respect to those, plus some additional.
But there are a remaining thousand NBA games together with lots of robust digital rights that we made with that, and those will be exploited by us in content and something that we refer to internally as NBA Digital. But that is utilized very much to support, to promote and to advance the interests of our broadcast and cable partners.

Q. Question for you on the amount years. What does that suggest as far as the future of TV rights and how happy you are in terms of the State of the game?
COMMISSIONER DAVID STERN: I am extraordinarily happy because I consider this to be a wonderful vote of confidence by our very sophisticated network partners who are making such a substantial and long-term commitment.
We have come to believe, we used to do routinely four-year deals and now the last deal was six and this one is eight. We have come to believe that in order to allow, encourage and really support our partners in what they are doing, they are now looking at longer, strategic investments in support of content and in order to support those investments and indicate to them that we just consider this to be simply the latest in a string of deals, but will be followed by subsequent deals; that longer is better to support the investments that are going to be made on a digital and global scale in NBA content.

Q. Commissioner, you were fairly I think frank in your comments during and after The Finals about the state of at least the over-the-air television ratings for NBA Finals. I'm curious as you go forward, I assume you're able to come to agreement that is will give you more money than you had in the last contract; with that in mind, could you sort of -- do you think that, what tweaks need to be made in the game, if any, to at least -- the over-the-air television audience?
COMMISSIONER DAVID STERN: I think that there is a new dashboard that is going to be used to examine viewing, and we use it now ourselves with respect to some of the aforementioned rights that I talked about.
You know, there's currently no place to put the 30 million streams of NBA -- of NBA highlights, and that's just on NBA.com. That doesn't include NBA 360 or ESPN Overtime or ESPN.com and everything else. Let me say that we are seeing a spreading of our engagement across a broader view.
That said, we also understand that increasingly it's going to be compared to what when you look at broadcast viewing; even in our historical context, they were a little bit low but they were the second and third most-viewed programs of the week, and actually, for three hours plus. So that's rather extraordinary. And then though we had a Finals sweep, each of those four games was very, very successful up against the competition.
So I think that we and our broadcast partners and our cable partners here think that there is ratings growth still in the NBA while at the same time, there will be robust growth in the digital assets; and that eventually there will be an erosion that in one -- but ultimately if we remain on our toes, an expansion of interest when viewed against all other lines.
Even though that question as addressed to me, I would encourage my colleagues to weigh in on that with respect to the view of ESPN and Turner.
JOHN SKIPPER: Let me weigh in. The question was specifically about The Finals. In the course of our overall digital, 27 of the 28 Finals' games have won the night for ABC and 22 of 28 games have won the overall night for ABC. So we are quite pleased.
David is quite right. It has to be put in the context of overall ratings and other programming. We do believe there's upside in the ratings and it's been a tremendous and consistent performer for us.
DAVID LEVY: For our purposes, since the last year of our prior contract, our regular season ratings have grown 17 percent in households and playoffs have grown 19 percent over the life of that contract.
And as David articulated, it's going to be -- this is a long, nine-year deal, and when you start aggregating all of the NBA viewers and the consumer, you're going to see far more people enjoying this sport within the TNT brand not just on a linear channel, but all of the digital aspects. That's how we are looking at this, as the aggregation of the eyeballs, people, viewers and consumers. We do see growth in this property.

Q. Even though you're not giving out numbers, would it be safe to assume that the NBA is getting more dollars per year in this new contract than it did in the previous agreement?
COMMISSIONER DAVID STERN: Yes. But don't push me anymore.

Q. Commissioner Stern, with this new deal that you've put together, it seems like Major League Baseball and others have taken from your template. Do you feel that this continues to put the NBA ahead of everyone else in the curve with the way that you've crafted with deal with your partners, ESPN and TNT?
COMMISSIONER DAVID STERN: Actually this deal was crafted as a tripartite vision of Turner, ESPN, and the NBA, which was really dictated by the moving opportunities that were presented to us collectively. In fact, what we have learned more from what our partners have begun to do in the quote digital space, than we could possibly learn by just doing it ourselves; and we in turn add our store of knowledge to what we are doing to their store of knowledge and collectively we came up with this deal. So this is not an NBA vision; this is a TimeWarner, Walt Disney, NBA vision of how future rights deals will be done.
But I do believe that we could sit down with our partners because all of our rights are housed centrally, and they know what to ask for, and who to ask. And given our relationships, we know when we should say no but when we should say yes and we heard a lot of yeses here.
GEORGE BODENHEIMER: Uncharacteristically, David is being modest. I really want to compliment the NBA for their forward thinking and understanding where the media companies are partnered with where they are going. It was really a mutual and partnership-like effort.
DAVID LEVY: I will agree with that.
COMMISSIONER DAVID STERN: Not the uncharacteristic part.
DAVID LEVY: The NBA has always been leaders and innovators on how they work with the media partners whether it was All-Star Games or Western Conference Finals that other leagues are following to. They have always recognized you specifically.
NBA Digital Assets are a huge part of sports properties, and brands that are extending outside the linear model and you guys have once again as I think George Bodenheimer said, set the prototype for future sports deals in the future.
COMMISSIONER DAVID STERN: If I may continue my uncharacteristic model, Mr. Bodenheimer, I will say that Bob Iger at the Walt Disney Company has determined that it will be a leader in digital content. And it's really transforming and I view this with respect to that as part of that transformation and still look to Turner with extension to a variety of products like Pipeline and other sports in the digital space. We are dealing with two companies who have a vision which is a shared vision I would say with us, which is why we're so happy; and looking forward to learning what we can learn working together.

Q. Discuss a little bit the exclusivity of how digital rights can flow. I assume that the ESPN platforms will be able to do what it wants with the ESPN and ABC content they have produced, and likewise with TimeWarner. And as far as third screens, mobile devices, could you talk about that a little bit?
JOHN SKIPPER: I would just point out that the exclusivities are relatively to our own games. We have extensive rights that we can exploit on mobile platforms relative to highlights and we have a right to -- right to broadcast our games on any platforms or services we choose and a right to take our news information product across any platform for news service that is we choose.
Again, we are doing all of this in partnership with the NBA which has lots of things they can do across NBA.com and NBA Television. We are happy with the dispensation of rights.
DAVID LEVY: And those rights are similar to TNT. We can take it across the TimeWarner properties and there's VOD, wireless and broadband involved in all of with our particular games.

Q. The NBA with its distribution will it be able to do what it wants with win -- for example, ESPN, TNT broadcast out there, will NBA also be using that content on its platforms?
COMMISSIONER DAVID STERN: We will be looking to ESPN to do its platform with its content for its games, and Turner and we will be directing ourselves to the remaining thousand games that we have.
Although, we were working cooperatively in ways that we're still working at in a good way to make sure that all of our fans can get all of our content when they want it.

Q. Obviously we're dealing with a contract of some length and no one can really predict what the landscape is going to look like in 2015. I'm assuming there's sort of open-ended language in terms of allowing the broadcasters to use emerging platforms that don't exist yet; I mean, how is that written and is there some sort after approval process if ESPN or TNT wants to start a new platform and start showing some content on that?
COMMISSIONER DAVID STERN: We anticipate that there will be new hat forms and these deals include rights to platforms yet to be developed with respect to the games that are shown.
We wants to encourage our partners for our benefit and theirs and the growth of their business and ultimately ours to engage in the development of new ways to deal and integrate with our pans fans.
I would say one other thing on that point. In the life of these deals, we're going to see something which you may think is old actually become so very prominent and that's High Definition. We believe that the presentation of our games which are now produced and shown in spectacular High Definition by our partners, but is not quite available to a large enough segment because of the smaller current distribution of HDTV we think that by the end of these deals, nine years out, High Definition will be the standard and will both drive people to the networks but also drive them to the digital extension.
And so whatever those digital extensions may be, and we want to encourage our partners to engage in that kind of experimentation.
JOHN SKIPPER: I would, one compliment the league on their flexibility of thinking on this. In our last deal we have launched seven now platforms, and every case the NBA has been willing to work with us to get content on those platforms. What we have acknowledged in this deal is that we will probably launch five or ten new platforms during the course of this deal and we are going to work together on those platforms. That's acknowledged in the deal going forward.

Q. Wondering if the complexities of negotiating digital rights together with broadcast rights caused talks to become more lengthy.
DAVID LEVY: Yeah, I mean, they are much more complex in the sense that there is a lot of things to discuss as far as rights, timing, when to get on, when to get off, VOD, broadband, wireless. The complexity of these deals when it used to be talking about the linear only has expanded the conversations dramatically and obviously kept our lawyers working to the hours that they have to work.
But I will tell you, again, complimenting David, he realized it's an important part of all new sports rights. So while timing would have been longer and more integrated, it was necessary to get the deals done.

Q. As far as subtle changes on the TV side of the deal, I guess one of them is ESPN law of exclusivity of semifinal games and maximum number of appearances on ABC will increase; what will be the new maximum number of game appearances on ABC and any other subtle changes which TV viewers will notice.
ADAM SILVER: There will be one additional appearance. It can't be the same team in the same year. So it's in terms of from an NBA team standpoint, they will not be required to appear for more than one additional time exclusively.
What's the second part?

Q. Is there a subtle change TV side which viewers will notice beyond that?
ADAM SILVER: This goes back to the points that John Skipper and David Levy had been making earlier. I think these deals give those networks broad digital rights that will complement the telecast, and it also goes to an earlier question about where we see ratings going. It seems counterintuitive, but television viewership has gone up over the last decade in terms of hours and minutes per day that people will watch.
We think that these digital complements will increase, and television viewership will be used in interactive ways to make it a more interactive experience to watch games on. And we know they are very much engaged with us in coming up with new technologies that will accomplish just that.

Q. What's the number of maximum appearances now, say once every two years a team could be on TNT, what, 12 times?
JOHN SKIPPER: Seven and ten. Seven exclusive, ten non-exclusive.
COMMISSIONER DAVID STERN: I would just add one thing. The beauty I think of this deal is that we ought to almost put our predictions in a time capsule. Because I believe by the end of the deal, the NBA fan will be watching on High Definition but will have an array of statistical, archival, biographical and replay camera selection, self-direction options that are now seen as futuristic, but will seem to be commonplace by the time these contracts are renewed after eight years.

Q. David, I know we've jousted on how to measure all of the platform stuff that's not non-Nielsen measured. But can you tell me what non- Nielsen measurements do you feel comfortable about how your content is distributed on all of these platforms?
COMMISSIONER DAVID STERN: We haven't jousted. I've just pointed out to you the ways in which you were wrong.

Q. That's true, and you've always been very charming about it.
COMMISSIONER DAVID STERN: Okay. So non-Nielsen, we have -- I go down to the basement to check our servers. And we get these extraordinary counts that demonstrate that in the month of April, 30 million fans streamed NBA highlights; that on ESPN.com, some additional millions of fans were tuning in; that on Airplay (ph) and Amp in a wireless way, fans are engaged with us. We have fans on video games but actually and growing will be online and not just on cartridge and ultimately on their handheld devices so that -- and I haven't exhausted the list.
We've gone in sort of a beta test for our own purposes the dashboard we talk about to begin to collect the data about the way fans view us. And in an interesting kind of a way, I think that ESPN with its multiple platforms and TNT with its NASCAR, PGA, PGA of America, CNN Pipeline have more experience than we do in sort of how they harvest those viewers, and that's why working with us, they were so intent on making sure that they could reach all of those viewers and fans across the array of platforms that don't currently get particularly well measured or incorporated. Is that a fair answer?

Q. I believe it is.
JOHN SKIPPER: Let me pile on with a couple of statistics. Throughout the playoffs we averaged over a million unique visitors to ESPN.com per day to get NBA playoff content. We had 700,000 wireless visitors a day to get NBA content. We had 32 million video starts of NBA highlights on ESPN.com.
COMMISSIONER DAVID STERN: And we averaged -- we had 4 million visits a day to NBA.com, as well.
DAVID LEVY: And this is '07.
JOHN SKIPPER: You're talking about 8 million visits per day between the two of us to get NBA content.

Q. Is the contract broken up in a way that there is a particular amount for digital rights versus a particular amount for the traditional TV rights?

Q. What do you see as far as advertising dollars, as far as for instance how many viewers or visitors on a Web site you need to get equal for what you would receive for one viewer watching traditionally over TV?
COMMISSIONER DAVID STERN: I think that there is a currently monetized way with respect to the cable and over-the-air. There's a little monetized viewing and it's pretty well established from the up-front to the spot, etc.
But with respect to these new areas, you know, yes there's online video, there's banner advertising, there are pop-ups, there are product integration. We are just beginning this long journey into the monetization into the digital space so that we are -- so that we are not involved other than being supportive and working together, we don't collect the checks that our partners sell, get, with respect to advertising and other engagements, and that's going to be the same way with respect to the digital space as well.
We just want them to make a lot of money so that these deals become every green.
DAVID LEVY: I would say that the advertisers are demanding it in the sense that multi-platform marketing campaigns are something that the advertiser is looking for. They want to be attached and involved with our talent from the linear side to the digital side to the wireless side so they can extend their messaging with our brand.
And so it's all part of the process. Again, I said sort of laughingly, if you will, or jokingly that it's only '07. Think about this and how long this deal is and what happens in '10, '11, '12, '13 of 2000 and think about what this is all going to mean for our advertisers as well as media partner.
JOHN SKIPPER: David is exactly right. I mentioned before, we had 32 million video starts on ESPN.com. They were sold out relative to advertising and our VPN on video starts, which is quite consistent with broadcast, so this is a growing business for us.
COMMISSIONER DAVID STERN: You didn't tell me that while we were negotiating, John.

Q. I was just curious what impact, if any, will digital platforms will on local team rightsholders' games.
COMMISSIONER DAVID STERN: We have found that these rights are additive and encourage viewership. We have not seen when you would think intuitively would be the falloff; indeed they make fans hungrier for the kind of information that you can get by going to the local telecasts, going to the team's Web site and generally increasing what the viewership is.
And I guess I would make a broader point here about sports. In all of the talk that's going on about the up-fronts, about the networks offering digital options with respect to their entertainment programming and the like, I think what we are beginning to discover is that, No. 1, sports is the programming for which there has been the largest commitment on a global scale when you talk about World Cup, Olympics, NFL, NBA, etc.
But more important, sports comes with natural programming elements built in, in effect, for all platforms and with a built-in community that continues to follow its sports.
So I think in many ways, under these arrangements, we will see the best possible iconic development of product extensions together with the community that wants to follow the very content, it's built-in, baked in at the moment of broadcast and inception, and it continues beyond that with respect to archives, statistics and community engagement.
And that's why the sponsors are looking for it because they want to connect with the fans in the same way that the fans connect with the game. And sports is clearly over the next decade going to be a leader in this particular development.

Q. Do you envision making money in all aspects of this deal? Are any of these segments loss leaders to a certain degree that you're putting more of your eggs in a particular basket of this deal; that you might see more of a profit margin off the digital side and less of a profit off the cable side? How do you envision it breaking down?
DAVID LEVY: The short answer is, no, I don't see anything being a loss leader whatsoever. In fact, they are all enhancers to the overall product and the overall brand.
You know, we see this as complimentary. Meaning our linear channel will be better suited if we have digital extensions to match it. We'll also have digital people that do not want to buy the television product that are only looking for the wireless or broadband or VOD extension.
You know, I keep going back, we are all looking at this as an '07 situation. And as you can see, and David used this before, how Hi-Def is becoming more popular. I believe, VOD and broadband and wireless will continue to grow in penetration, will continue to be an important part of all of our brands, every one of our asset base of programming and of networks.
And so these will all in its own individual self probably be very profitable.
GEORGE BODENHEIMER: I would echo some of the comments made by David Levy. You know, we at ABC have specific experience with this over the last year or so in experimenting with our ABC broadcast product on ABC.com and through iTunes, of course. It absolutely does not cannibalize anything. In fact, it shows we are driving an incremental audience, so there's a benefit all up and down the food chain of finding new ways to distribute quality content like the NBA. So I certainly expect all of this to be complimentary to our core television businesses, not cannibalize it.

Q. Do you have a sign on date for TBS HD?
DAVID LEVY: TBS will be September.

Q. Can you just name three or four new rights on the digital side that you didn't have before?
DAVID LEVY: The rights to simulcast TNT games on additional digital platforms since wireless and broadband and VOD; the distributing content of highlights and studio shows outside of our TimeWarner portfolio, but with limitations of what amounts need to be attached to it as well; the interactive online elements, selected camera angles, statistic feeds, complimentary video, NBA Fantasy game license, just to name a few.
JOHN SKIPPER: It would be exactly the same because we have complimentary packages. I would specifically note that we have the right to take SportsCenter, and pardon the interruption, our other important news and information programming and distribute that on ESPN.com both in its entirety and in segmentable sections of that.
THE MODERATOR: Thank you, everyone. Thanks for joining us today.

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