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August 25, 2008

Pete Derzis

Burke Magnus

John Skipper

Mike Slive

CHARLES BLOOM: Welcome to today's Southeastern Conference ESPN media teleconference. We thank you for joining us today. My name is Charles Bloom, and I will be the Moderator of this call.
On the call, we have Southeastern Conference Commissioner Mike Slive, ESPN Executive Vice President for Content, John Skipper, and ESPN Senior Vice President for College Sports Programming, Burke Magnus. We'll have opening statements from Commissioner Slive and John and take questions for all three following the opening statements.
We begin today's teleconference with SEC Commissioner, Mike Slive, Commissioner?
COMMISSIONER SLIVE: Thank you, Charles. Ladies and gentlemen, I am pleased to announce today that the Southeastern Conference has entered into an historic 15-year agreement with ESPN, the most expensive college conference agreement ever.
This agreement makes the SEC the most widely distributed conference in the country. At the outset, I want to acknowledge and thank our presidents, chancellors and athletics directors for their guidance and support throughout these discussions.
I also want to thank the senior ESPN management team for its vision and creativity which made this very significant agreement possible. Namely George Bodenheimer, John Skipper, John Wildhack and Burke Magnus.
As most of you know during the past couple of years the Conference has been considering two options: To launch an SEC Channel or to license the grant of rights to one or more television entities.
In considering these two options, our goals were as follows: To provide expanded national exposure for football, men's and women's basketball and our Olympic sports; to further increase the recognition of the Southeastern Conference nationally; to provide the opportunity for our institutions to promote their academic initiatives and achievements; to provide widespread distribution of SEC programming for our fans, both inside and outside of the SEC footprint; to recapture the copyright of our games; to retain digital rights for the benefit of our institutions and conference as we move into the age of new medias, and, finally, to provide financial stability for the Conference and for our institutions.
At the same time, while considering these options, we did not want to significantly diminish what our institutions have traditionally done with their local multi-media packages, which provide distribution of their games and provide our institutions with significant revenue.
Our agreements with ESPN and CBS allow us to achieve these goals without the problems and risks associated with creating a channel. In some ways, these agreements increase the national exposure for football, significantly increase the national exposure of men's and women's basketball, to help increase the national exposure of our Olympic sports. Provide a significant opportunity to promote academic achievement at our institutions, increases national recognition of the SEC, retain control of the SEC copyright and our digital rights, and finally, provides long-term financial stability for our institutions.
Most of you have seen the release which goes into considerable detail about the agreement. Nonetheless, I thought it might be helpful at the outset if I highlighted some of the package for you.
First, generally speaking, all broadcasts of games on ESPN platforms including ESPN and ESPN2, will be prominently branded and promoted as "The SEC on ESPN". Games telecast in syndication and regional cable will be branded the Southeastern Conference, the SEC.
In football, all of the football games to which the conference controls the rights will be televised on ESPN, ESPN2, ESPN-U, ESPN Classic, on an expanded over the air syndication package, ESPN Game Plan, regional cable package or on CBS.
In men's basketball, all men's regular season conference basketball games will be televised on ESPN, ESPN2, ESPN2, ESPN-U, ESPN Classic, over the air syndication package, regional cable packages, ABC and CBS. All games in men's basketball not on a national platform will also air on ESPN Full Court.
This triples the number of games on ESPN and ESPN2, and adds two additional nights a week of national exposure for SEC basketball.
Additional, non-conference games will be televised on ESPN platforms. The men's basketball tournament semifinals and championship game will be televised nationally on ABC. Early rounds will be televised as part of the syndicated package.
In women's basketball, the women's basketball will nearly double. The tournament championship game will be telecast on ESPN or ESPN2, the semifinals on ESPN-U, and the early rounds on ESPN-U or regional cable. There will be significant increases in our coverage of our Olympic sports on ESPN, ESPN2, and ESPN-U.
An important component of the package is our academic initiatives. There are five. There will be two one-hour programs per season dedicated to the academic achievements across our academic institutions.
Two, as part of our ESPN's campus connection on ESPN-U each year, students at each of our institutions will produce, direct, and serve as a talent on a live event telecast under the ESPN production team assigned to that event.
Each year, a student intern from each of our institutions will be hired by ESPN to learn television and communications. A weekly, one-hour program over 41 weeks on ESPN-U will be dedicated to SEC Sports where at least one feature per episode dedicated to academics.
And the lastly and most importantly, ESPN will provide the conference with the technology and operations infrastructure to create an online SEC academic network, utilizing ESPN 360 technology.
A considerable amount of additional programming. I'll just try to summarize it quickly. The one-hour show over 41 weeks dedicated to SEC Sports I mentioned above. In addition, ESPN-U will produce and televise a one-hour preseason SEC football show and a one-hour men's and women's basketball preview show.
On a syndicated basis there will be a weekly SEC studio show during football and basketball season, an hour-long preseason show for SEC football and basketball, an hour-long SEC football championship and bowl preview show, and an hour-long SEC basketball tournament and postseason show.
The SEC in this agreement has obtained control of rights that will facilitate the ability of each member institution to make its own digital offerings. That includes games that have been televised in the past, as well as games televised in the future.
The conference and the conference institutions will have the ability to re-air games on their institutional local packages, and to do same-day internet streaming after certain time restrictions.
That is a brief summary of the package. You saw more detail in the release. But before closing, I want to say a special word of thanks to Mark Womack, Mark Whitworth, Charles Bloom and Charlie Hussey of our staff whose work on this project over the past year has been extraordinary.
We appreciate you being on the call. Look forward to talking to you later. It is now my pleasure to turn the call over to John Skipper, ESPN's Executive Vice President Content.
JOHN SKIPPER: Thank you, Commissioner. I just first want to start with thanking you, Deputy Executive Commissioner, Mark Womack, and all the other folks at the Southeastern Conference who just were tremendous partners to work with on this. We enjoyed the discussions. Also appreciate the guidance and support from your presidents and athletic directors, and would like to call out Dr. Sorensen of South Carolina who is the outgoing President of the Southeastern Conference, and Dr. Todd, the current President of the Southeastern Conference who provided us a lot of guidance.
We're thrilled too with the historic nature of this deal. Just to look at the top line, 15 years is the longest deal we've ever done. Not that hard to contemplate, given the fact we've been in college sports as part of our DNA for 29 years. So not hard to think we'd want to be in it given the quality of the Southeastern Conference's sports overall for the next 15 years.
You heard the Commissioner lay out a lot of what we're going to do. Suffice to say from our end, our current contemplation is to show over 5500 events over the next 15 years, and that is before we think of the next three or four platforms that we want to create in the next five or six years.
It will include, as you heard the Commissioner say, every football game, every conference men's basketball game, as well as unprecedented numbers of women's basketball and Olympic sports. It's just lots and lots of rich content in this conference that we can use across all of our platforms. That is the last point I want to hit.
Just in keeping with how we've been structuring our deals over the last two or three years, we are thrilled at the breadth of rights that we're getting here for all of the many platforms that we use to serve our fans. ESPN on ABC, ESPN2, ESPN-U, ESPN 360, ESPN Classic, dot-COM, mobile television, and we're sort of thrilled with having that content across all those platforms.
I would end as well with thanking my team just as the commissioner did, John Wildhack, Burke Magnus, Pete Derzis, Marie Donahue, just did a spectacular job of getting this deal done.
Commissioner, thank you. I know that Mike and I would be happy to answer any questions you might have.
CHARLES BLOOM: John, thanks. Our participants are now available to answer any questions you have.

Q. Burke, I wanted to ask you, can you tell me about what kind of impact you see for ESPN regional TV here in Charlotte? Will you have to add staff? Where you do most of this programming out of Charlotte? Some of your initial thoughts on how this would impact this market?
BURKE MAGNUS: Thanks for the question. Also on the call is Pete Derzis, our Senior Vice President in charge of ESPN regional. I'm sure Pete can offer some thoughts relative to that organization in particular, and how they're going to integrate this opportunity into their plans long-term.
PETE DERZIS: They have been in our plans in hopes of landing this historic contract. So we'll continue to beef up the numbers. We're going to be modifying our studios to accommodate the growth necessary to do the fully integrated studio shows for both the SEC football and basketball Saturday packages.

Q. Commissioner, with the association with Raycom, and FSN South and so forth, so that everything will either be on CBS or one of the ESPN platforms; is that correct?
COMMISSIONER SLIVE: No, it's not, let me try to answer that for you. It does end our relationship with Raycom beginning a year from now, not next year. Because the over-the-air syndication package that Pete Derzis will be watching over will be done by the ESPN platform, ERT.
One of the significant features of the new over-the-air syndication package is that it will not be limited to the nine-state region. Our over-the-air syndicated package in the future will not only be on our footprint, but will be over-the-air in a significant part of the country in some very major cities. So that is one piece.
There still will be, we expect to have very significant regional cable packages, and ESPN and the SEC will work together to offer multi-sport packages, including football, men's and women's basketball, Olympic sports and conference championships with SEC contact for regional cable syndication.
So when you think about all of this, it's CBS, over-the-air, ESPN and its various platforms, still an over-the-air syndication package of significance, and we hope at least one, if not more regional cable packages, which will make us the most widely distributed conference in the country.

Q. With regard to college football, does this mean that every SEC game, every game involving an SEC team would be available in some form on ESPN, on some platform, either regional or the pay-per-view ESPN game plan?
PETE DERZIS: So every home football game or every football game that the conference has a right to will be televised on one or more of the various packages or platforms either over-the-air, on a network platform or one of the ESPN platforms, including over-the-air and on regional cable.

Q. Burke, if I'm the fan sitting at home I understand CBS, and I understand ESPN, I understand ESPN2. I'm used to that. What I need you to tell me is what happens after that? If you're the fan at home the game that I'm used to getting from Raycom or Jefferson or Lincoln Financial, where am I going to look for that game now?
BURKE MAGNUS: Let me start first, then Pete can add his thoughts relative to syndication. But as Commissioner Slive mentioned at the top, we are going to have through ESPN regional television, the traditional over-the-air syndicated package that will be SEC branded that the conference and ERT will work together to distribute over-the-air in all the major markets where Raycom was and beyond.
As you know, ESPN regional is the largest syndicator in the country, and we've been very successful over the years distributing content from the Big Ten, and the Big East and Big 12 and others. So this model will now apply to SEC, whereas, Raycom would have filled that role to a certain degree in the past.
But for as far as syndicated games are concerned and then beyond that through ESPN-U and regional cable packages, the bottom line here is that fans of SEC football will have more access to more games and better distribution than they've ever had in the past.

Q. We're seeing some reports that ESPN-U is probably going to be more widely distributed than it is now, perhaps with a new deal with com cast. Can you speak to that at all at this point?
BURKE MAGNUS: What I can tell you is that we're obviously in active conversations with Comcast. We have been for some time on ESPN-U. I can't speak for them, but I believe they recognize the value in ESPN-U, which is why conversations are happening. This will accelerate that process, we hope.
We have great things planned for ESPN-U, as far as distribution in the SEC territory currently, through our agreements with Direct TV and Dish Network and Time Warner and Cox and Charter and several other smaller operators that serve as the SEC territory, we're off to a good start. We need to also get an agreement in place with Comcast. We're going to work hard to do that, and this is the first step in that direction.

Q. Commissioner, I want to make sure I heard you right. Under this agreement I can say that if you're a fan, every SEC home game will be somewhere in some format either on CBS or ESPN, one of the formats?
COMMISSIONER SLIVE: Yes, one of the various platforms, and that is a significant change. One of on our goals was to increase the exposure nationally about football that this allows us to do that.

Q. Tony asked if all the home games would be on some platform. For pay-per-view games is that still possible for schools if you're playing a non-conference game?
COMMISSIONER SLIVE: Yeah, each school has an opportunity to do one pay-per-view game per year.

Q. Is that different than in the past?

Q. Is it unlimited now or is there a certain number at this point?
COMMISSIONER SLIVE: I think in the past, if my memory serves me, games that weren't televised our institution could put on pay-per-view. But now the essence is that all of our games are televised, but each institution has an opportunity to do a pay-per-view game.

Q. Also, Burke or John, could you just tell us how widely distributed ESPN-U is within the Southeast and perhaps nationally at this point and what your hopes are for?
BURKE MAGNUS: Nationally, we are at 22 million homes currently. We have agreements with 7 out of the top 10 distributors. Obviously, the one that we're working actively on would be critically important is Comcast as the number one distributor nationwide.
The network's not quite even four years old yet. It's only three years plus. So we think we've done a pretty good job up until this point. Servicing the SEC territory right now through Dish, Direct TV, Charter, Cox, and Time Warner among others. So that's where we stand now.
It's good distribution now. It is not perfect. It's going to get better. We're going to work very hard to make it better, and working in concert and in partnership with the SEC to make sure that their fans get access to the content on ESPN-U is critically important to us.

Q. Have I heard you to say all home basketball games in the SEC will also be on one of the ESPN platforms?
COMMISSIONER SLIVE: All conference home games.

Q. But the local schools will still hold the rights to the non-conference games?
COMMISSIONER SLIVE: Yeah, what we've done one of the important parts of the agreements is our institutions can take for their local packages games that are not selected either by CBS or one of the ESPN platforms and go ahead and put those games in their local package in the territory as they have in the past.
One addition that is pretty critically important, is that they can worldwide stream those games on the internet, which then means that the game is now available through their packages to anybody in the world who wants to watch it, and that is different than it's been in the past.
BURKE MAGNUS: As far as our commitment is concerned, obviously, basketball was a key component to this. Mike alluded to it earlier, but we're going to triple our games that are available on ESPN and ESPN2. We're going to add a regular game on ESPN-U. We're going to have a regular season game on ESPN on ABC, the conference tournament semifinals and championship obviously on ESPN and ABC as well.
So we're very excited about boosting distribution and exposure for SEC basketball as well.
COMMISSIONER SLIVE: Just to supplement Burke's comment, that means our basketball will be on available Tuesday night, Wednesday night, Thursday night and Saturday.

Q. In terms of sharing revenues with schools, how much could schools see an increase in revenue once this deal takes place?
COMMISSIONER SLIVE: I'm not going to abandon my life-long position. I'm not going to talk about money.

Q. I knew you'd say that.
COMMISSIONER SLIVE: We've known each other a long time. But I do think one of the things I did point out in my opening remarks was that these agreements will provide long-term financial stability for the conference and its member institutions.

Q. How close were you to launching your own network? What ultimately made you to decide to got this way?
COMMISSIONER SLIVE: That's a good question, John. I can remember when the Big Ten announced their channel -- I don't know how many years ago it was now -- but we had also had been talking about it at that point, and obviously had to wait until our contract came to terms to make a decision.
You know, we thought a lot about it. I think I laid out early all of what I considered to be all of the goals that we were after. And one of the things I thought about really early was, you know, every conference is different, and the traditions of every conference are different.
We've certainly had a lot of interest in the channel. But when we began to look at things like distribution, finances, academics, national exposure, all those kinds of objectives, when we were able to negotiate the ability to get those objectives to the more traditional route, we began to -- I think I started out with the mind to do the channel. I think I was there about a year.
So when it got down to the nitty-gritty and looking at all of the different elements on how to serve our fans what, business are we really in. When we sat down with ESPN and outlined for them our various goals, I meant what I said when they had vision and creativity. Every time we told them the channel allows us to do this, and they came back with an answer to do that. Then slowly, but surely, it began to happen.
Then in the final analysis the piece that makes us a little different is our institutions. Over the years we've permitted our institutions to on selected events to televise on local packages, and those local packages throughout our institutions have real value.
And so by looking through that, and being able to retain those local packages, and the revenue that is generated by them, in addition to the revenue generated by the CBS and ESPN packages took it over the top.

Q. Mike, two years ago every coach in America would have taken a million dollars a year for life. In less than a decade, they realize that's not as much as they thought it was. What have you built in? This is 15 years, is there anything built in to make sure you don't get surpassed by a new market in the next decade?
COMMISSIONER SLIVE: That is a good question, and what we did was we thought a lot about that and in the final analysis, looking at -- here's where it started for me. If we had done a channel which was the opportunity to get -- to try to do what we wanted to do, that would have been at least a 20 year to 25-year commitment.
So when you're looking at different options, you know, that horizon changed my thinking and I think the thinking of our league. So once we realized that we could do that, it made some sense to be able to think about maybe a longer horizon.
Given the strength of the league and particularly when we were able to do that with CBS and ensure that an over-the-air network would stay in college football is a contribution that the SEC has made for the national collegiate scene, we thought if we can do that, let's maximize the number of years, let's maximize stability, let's maximize the future and insure the future.
And, you know, at some point in time when you get out 13 or 14 years, and if the world is different in one way, then we'll take advantage of it then. If the world has changed in another way, we made a great decision.

Q. Just one thing for the ESPN guys, on the other hand there is the Big Ten network, a lot of talk about leagues and conferences controlling their own packages. How much is this a statement on your guys parts just to be at that still that worldwide leader in sports by locking up conference programming like this?
JOHN SKIPPER: It was important to us. You heard me say at the very beginning, college sports is part of the company's DNA. This is a premier college sports product, and we felt that establishing a long-term deal with the Southeastern Conference would make that statement, so, yeah, it's a statement that's important to us.

Q. Mike you mentioned retaining rights for future broadcasts and DVD's. How much future revenue have you determined that might bring to the conference down the road?
COMMISSIONER SLIVE: The whole world of new media is a world of the unknown. The technology, you know, if you look back ten years all these little gimmicks that we use to get information, or various tools didn't exist. That is what is going to be out there in ten years, we don't know what's going to be out there.
So what we did is we preserved the right for us to take advantage of various unknown platforms through our institutions over time. I'm not just talking about money, but whether there is an ability to totally monetize those rights at this point, may be a different question as to what our ability is to monetize those rights back ten years from now.

Q. Would that be the same if you didn't retain the rights?
COMMISSIONER SLIVE: I think it would have been, yes. And one of the nice things I'm going to say here in our conversations we never got to those kind of positions. I think that John and John and George and Burke, and everyone realized that we had to do certain things that gave us some kind of controls that might not otherwise have existed in order to not do a channel. And I think it's worked out for us and very well for them.

Q. I don't know how it's worked in the past, this deal seems to be so different from anything you've ever done. What was the deal behind letting things like rights for future broadcasts and DVD's go in this situation?
JOHN SKIPPER: We believe there is a lot of value in all of these rights and there is plenty of opportunity for the Southeastern Conference to realize that value and for us to realize that value.
Understand that what we got was a lot of content across a number of platforms. Major new rights are not part of our current deal. Football game of the week, basketball game of the week for you triple the men's basketball inventory on ESPN. You heard about all the details about ERT and the syndication home. College basketball tournament on ABC, it also includes a ton of digital right that's we can exploit and the AAC can exploit.
We get highlights rights for all of our internet properties, re-air rights, rights for 360. But they are nonexclusive, because the SEC can exploit them with their schools. They can exploit re-airs and DVD rights into the future.
Part of it has to do with the 15-year nature of the deal. The Commissioner nor I knows exactly where all of this is going to go, so we've agreed that we're going to work together. And he has a big basket of digital rights and multi-platform rights and so do we. And to some extent, we'll figure out how we're going to make money off things in the future.

Q. Is there a possibility of somewhere down the road there are joint ventures between the two entities to actually distribute and do the DVD's or anything else that might follow?
JOHN SKIPPER: If this partnership works the way we want it to work, there will be lots of things done together. We've instituted among other things sort of a quarterly get together for the Southeastern Conference to work on things that may come up.
You've got to figure out some mechanisms over the 15 years given the length of this for how you're going to deal with things that you couldn't contemplate on this specific date. So if it works for us and it works for them, I suspect we'll do some things.
CHARLES BLOOM: We appreciate everyone calling in, and we appreciate you being with us, and we look forward to seeing you this season in college sports in the SEC. Thanks a lot.

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