Discover more from BRK Daily
1997: Do ABC's ratings affect Disney's bottom line?
AUDIENCE MEMBER: Mr. Buffett, I’m Rick Fulton from Omaha. Really.
Recently I was in Washington, D.C. on — with my wife on a business trip, and I wanted to tell Mrs. Graham, I know she’s here, what a pleasure it is to get up in the morning to a good newspaper like the Washington Post.
Also, I have a question about CapCities and now Disney.
And is Mr. Murphy keeping busy now that ABC’s owned by Disney? (Buffett laughs)
Also, every week you read in the paper the Nielsen ratings. And does it matter that ABC now, it seems that less people recently are watching? Does it matter to Disney’s bottom line? Thank you.
WARREN BUFFETT: Well, the first question about Mr. Murphy is that if we could hire Mr. Murphy we would. I mean, there is no one in this world that is a better manager than Tom Murphy, or a better human being as far as that’s concerned, so —
He — I think he’s keeping pretty busy. He has been responsible for NYU Hospital. He wouldn’t say that, but he’s been the chairman of it for some years, and that’s a $800 million a year or thereabouts organization. Charlie runs a hospital, so he knows how busy it can keep you.
And he — but I would say this, that I would love to find a business that I could entice Murph to come back and run. Because they don’t get any better than he is.
And Charlie, you want to add anything on Murph, or?
CHARLIE MUNGER: Well, I’d like to because you’re absolutely right. (Laughter)
WARREN BUFFETT: And what was the other part of the question?
AUDIENCE MEMBER: Sir, does recent — the decline in ABC’s Nielsen ratings —
WARREN BUFFETT: Yeah.
AUDIENCE MEMBER: — have anything to do with the bottom line?
WARREN BUFFETT: Are we talking (inaudible) —
AUDIENCE MEMBER: — (inaudible) Forrest Gump last night? (Laughter)
WARREN BUFFETT: Yeah, it makes a difference, sure. Ratings translate in many cases into, not — depends on daypart, depends on a whole bunch of things. But overall, you make more money if your ratings are good in news, if they’re good in early morning, if they’re good in daytime, if they’re good at late evening, whatever. I mean, ratings translate into money.
They may not translate immediately, particularly if they have some big hit show you may have sold it out too cheap. But over time the prices you receive for your product relate to ratings.
And over time, but over a longer period of time, the price that you pay for the product also relates to the ratings. But there’s a difference in the time cycle. So that it makes a difference to any network’s bottom line what their ratings level is.
Disney is conscious of that, and they are very able operators, and I predict you’ll see in a couple of years. But you can’t it immediately. The schedule fixes don’t work on a, you know, week to week basis because people have habits, and there’s a time lag involved in any change.
And you’ve seen — over the last 20 years — you’ve seen various networks on top or on the bottom from time to time. So it moves around. It moves around a fair amount.
CHARLIE MUNGER: Yeah, I think the TV network business is intrinsically a pretty tough business.
And Disney did way better on ESPN than they might have forecast, and they probably did a little worse on the network. These things happen.
WARREN BUFFETT: That was, incidentally, the situation when CapCities bought ABC. In 1985, we made the deal, I think, and it closed — I think it closed the first day or two of ’86. I may be wrong on that.
But the network diminished — the ratings — diminished significantly, and particularly in daytime. We’d always thought daytime was almost a certainty to produce big earnings, and it had.
Primetime is what people pay the most attention to, but daytime slipped significantly after we bought it. It has no relationship to those movies — I mean, to a movie you saw earlier — when I started appearing on it. Don’t want anybody to make that connection, but it did happen to be at the same time.
The kicker we got, again, was ESPN. ESPN was losing money when CapCities made the deal to buy ABC, and we never really regarded it as being that — having that big a potential.
And you know, it has been huge. It was enormously better for us than we ever anticipated.
Leonard Goldenson, who ran ABC, told us it was going to be that good. But, of course, we were too smart to pay any attention to him. And I think Disney has been pleasantly surprised by how well ESPN has done, too. It’s a powerhouse.