The Smartest Guys in the Room

By Ramzy Nasrallah on November 7, 2011 at 2:03p
42 Comments
Enron's Ken Lay & Jeffrey Skilling: Ambassadors of accurate reporting

You might not realize it, but all of us at 11W are full-time professionals whose real, day job expertise occasionally bleeds into our fake, part-time expertise here. This is going to be one of those times. Relax; it will be over in four very short paragraphs.

Now begins your 30-second MBA: All corporations have the same primary goal and that is the maximization of shareholder wealth. Whether the company sells bird seed or back rubs, that is why the company exists, period.

Often times there are conflicts between management and the shareholders because occasionally the managers' prudent stewardship of the corporation does not always overlap with that maximization of shareholder wealth.

This is called the Agency Problem. It happens all of the time, even where you work. The problem typically involves risk-taking, short-term vs. long-term thinking, ethics and the environment to name just a few of the common ones.

Shareholder wealth maximization is expected to occur under the umbrella of social responsibility. The two do not have to be mutually exclusive, nor should they be for any corporation - whether it sells bird seed, back rubs or is the Worldwide Leader in Sports.

Congratulations, your 30-second MBA is over.

Late last month Kelly McBride of The Poynter Institute, which has been masquerading as ESPN's independent ombudsman as of late recapped ESPN's scorching conflict of interest in college football realignment. She closed her rambling piece (if even I think you're rambling...dude) with the following laugher:

As long as ESPN maintains its journalistic standards and increases reporting resources devoted to college sports -- even as its business interests in colleges grows -- the network should assuage most of its understandably skeptical critics.

It's an absolutely breathtaking statement coming from a think-tank that is allegedly, you know, actually watching the network it is supposed to be independently reviewing and critiquing.

There isn't too much mystery about what comprises ESPN's journalistic standards: It's an entertainment company that contains an inappropriately-named news division which operates solely on the premise of delivering the content that will generate the highest traffic.

The higher the traffic, the more lucrative the contracts, the advertising and the corporate partnerships are. And they have been lucrative: ESPN is now worth about $25 billion.

This is why the New York Yankees and the Boston Red Sox were routinely discussed on ESPN throughout the Major League Baseball playoffs despite the Yankees' early elimination and Boston's failure to even reach the postseason. That was ESPN's overt attempt to keep its biggest baseball markets engaged even though its teams were already on vacation.

From a college football standpoint, ESPN eschewed journalistic standards the very second it began selectively investing in some of the entities that it participate in its content.

The University of Texas has a 20-year deal with ESPN worth $300 million, which means the network now has a vested interest in Texas being both interesting and relevant. Let's say that a Tatgate-like scandal occurs in Austin: What is the likelihood that ESPN will inundate UT with Public Records Requests, constant coverage and sensationalism, and ultimately - a lawsuit to seek more information?

Doing so could violate the most important tenet of maximizing shareholder wealth. A weakened Texas athletic department siphons value from ESPN's business investment. Its news organization does not operate autonomously, regardless of whether there is a direct business benefit to doing so.

Consider its Tatgate coverage: Ohio State is second to Texas in football revenues, which means that it garners a lot of attention. ESPN's coverage of Ohio State's troubles went so far beyond story coverage that it actually ventured into the full manufacturing of additional content to fulfill its Tatgate narrative.

In July, Ohio State and the NCAA released the transcript of the investigators' interview with Jim Tressel. The university's hearing with the NCAA Committee on Infractions was August 12.

Examining other recent COI hearings - Boise State, Tennessee, UConn - each school received its verdict in 12 weeks following their hearings.

So that's why it was interesting that exactly 12 weeks after Ohio State's COI hearing, ESPN suddenly began promoting a pre-packaged exclusive Jim Tressel NCAA interview audio (audio of a transcript that had been publicly available for over three months) to create a bigger splash for what should have been the COI's judgment for the Buckeye football program.

It wasn't bias against Ohio State. It was bias for ESPN shareholders, who benefit from getting the most traffic out of what would have been regularly reported news to a news organization committed to credibility.

Unfortunately for ESPN, Terrelle Pryor's disclosure of Bobby DiGeronimo's cash-filled envelopes screwed up the timing and delayed the decision. Normally COI findings comprise a fairly procedural news story.

Oregon head coach Chip Kelly and UConn basketball coach Jim Calhoun were both recently interviewed by NCAA investigators regarding violations at their schools that involved both of them. Both men also happen to star in current ESPN commercials.

Try and imagine "exclusive" audio tapes of those interviews making it to ESPN along with unscientific analysis of either man's voice inflection, which is what ESPN had accompanying Tressel's rehashed nine-month old interview.

There is zero conflict of interest for ESPN's business to cover Ohio State the way that it has. For Texas, however, there would be. Not only can't ESPN be reasonably expected to objectively cover Texas sports, it isn't even allowed to: It's actually written into the Longhorn Network contract.

ESPN has firm control of the sports media in America, and now - contractually - Texas controls ESPN's content through its own network. This essentially means that Texas controls the news about Texas, and objectivity has been eliminated.

So McBride's assertion that ESPN 1) even has journalistic standards and 2) is maintaining them in a way that might appease its critics is complete nonsense. It's predicated on the idea that the public at large is completely uninformed or willfully ignorant to how ESPN operates as a journalistic entity.

Not only that, but the network is now deliberately making sure that its news operations are kept private. ESPN is no longer allowing its reporters to write books that include information they're privy to through ESPN.

Remember what happened with Bruce Feldman, Mike Leach and Craig James? This abrupt change in policy is intended to make sure that never happens again.

If looks could kill, they probably did. Five times. #RIP5DHJames hired a PR firm and worked with ESPN producers to manufacture scandal at Texas Tech

And speaking of James, who used his position at ESPN to inflate and manipulate facts that ultimately led to Leach's dismissal from Texas Tech: He is still, somehow, employed by ESPN.

Remember - according to its appointed watchdog, the Poynter Institute, ESPN is maintaining its journalistic standards to assuage its critics.

Also employed by ESPN is noted spousal abuse advocate Bob Ryan, who on yesterday's edition of The Sports Reporters tried to favorably contrast how Penn State handled Jerry Sandusky against Tressel's cover-up at Ohio State, since serial child rape and discounted tattoos carry equal severity.

With ESPN's pitiful track record of journalistic integrity and its contractual control over the vast majority of college football's programming content, what could possibly go wrong if the network is, in fact, pulling the realignment strings behind the scenes?

The trickle-down implications are enormous. With ESPN playing God with college football, the institutions now answer to a corporation. Universities will make strategic decisions based on the encouragement from a media conglomerate.

It's already happening: Boston College's athletic director accidentally disclosed that ESPN advised the ACC on which schools to invite for membership. When millions of eyebrows immediately shot skyward, he lied and said he misspoke (how do you "accidentally" say that?)

It makes perfect business sense for ESPN to shape the college football landscape: By optimizing matchups and minimizing the potential for unfavorable bowl pairings to artificially manufacture the most interesting games possible, ratings, ticket sales and ad revenue stand to benefit.

This is the maximization of shareholder wealth without the dreaded Agency Problem, with the managers and the shareholders are in cahoots with each other. Quick addendum to your 30-second MBA: ESPN has constructed a classic monopoly over a multi-billion dollar industry.

It's in the math: There are 35 bowl games this season. ESPN owns almost 20% of all bowl games (not owns the broadcasting rights; actually owns) while having the broadcasting rights to 33 of them.

So the BCS coffers are now solidly in second place: Nobody is more invested in the bowl system than ESPN.

This means ESPN owns 95% of a college football postseason that is predetermined by matchups, not by a tournament, not by randomization and often times, not by merit but by potential television and stadium audience (cough cough cough Notre Dame cough).

The involvement and investment are so deep that when ESPN is covering college football, ESPN is often actually covering...itself. It's inability to recuse James from the Texas Tech story was a low point in major sports journalism history.

But as you already probably realize, ESPN doesn't need monopoly to integrate itself into a story; it has been full-on meta for years. This is the humorous side of that journalistic integrity that McBride referred to.

Consider its coverage of Tim Tebow, who has been thrust - by ESPN, almost exclusively - into conversations on all of its platforms: Each of its television networks, radio programs, Internet content and social networking sites frequently have Tebow on the marquee.

Tebow is mentioned in stories and in discussions that do not involve quarterbacks, the Denver Broncos, or sometimes - not even football. "Tebow" has even been its own category on ESPN's bottom-line screen crawl numerous times, along with topics like "World Series," "NFL" and "NBA labor dispute."

The punchline arrived a couple of days ago when Sportscenter asked the following question of its audience, with a straight face: Is Tim Tebow overhyped?

Basically it comes down to this: ESPN already owns the rights to the most lucrative cash engine for major universities and expects the public to believe that it will idly stand on the sidelines while the landscape of college football is reshaped by conference alignments that affect multiple billions of dollars in that engine.

For a company whose VP and director of news, Vince Doria, openly admits that ESPN is the largest conflict of interest known to man, that amounts to a wink, a nod and a promise that it cannot possibly keep without betraying its shareholders.

The maximization of wealth is ESPN's first priority, which it will fail to accomplish by standing on the sideline in the conference realignment frenzy that it is helping accelerate.

The social responsibility aspect and conflict of interest is being self-policed, and very poorly. The Poynter Institute making a mockery of its role as ombudsman serves as further evidence that ESPN is now far beyond just being a broadcasting partner in college football in scope. It is college football.

You'll know that its mission is complete when college football's already disingenuous postseason becomes an even bigger charade as ESPN overtly chooses the optimal television matchups for BCS games. And it will happen with everyone watching.

42 Comments

Comments

The Six Fingered Buckeye's picture

Another home run. I doubt Ramzy has a bad story in him. Unless forced to cover the Blue Jackets.

Please, be honest. This is for science.

JLP36's picture

Oh good, nothing to worry about there...

 

JLP36

osukdawg76's picture

Great stuff, Ramzy. It goes to show you that ESPN is basically eating itself.

I, for one, welcome our new coaching overlords.

 

 

Run_Fido_Run's picture

Good work, Ramzy!

Obviously, I'm not privvy at all to any of the inside details, etc., so I could be reading the situation totally wrong, but someday we might have to erect a bronze statue in honor of Jim Delaney.

ArTbkward's picture

Does the NCAA drink the ESPN Koolaid?  I don't know enough about the politics behind these things but it makes me wonder how influential ESPN is over the NCAA.  I can imagine OSU got an extra fine tooth comb simply because of the media hype.

We should strive to keep thy name, of fair repute and spotless fame...
(Also, I'm not a dude)

onetakedizzle's picture

This guy doesn't really have his MBA.   Don't let the eloquent writing fool you.

Send you to OSU Hospital / You'll need a buck nurse...

Riggins's picture

MBA or no MBA, the always eloquent writing can be blamed on the alcohol.

cronimi's picture

Agreed.  That's why I've intentionally been avoiding clicking espn.com links or watching anything other than live CFB games on the WWL's networks.  It isn't easy, but it's the only way (as fans) to hit them where it hurts (ad revenue).

Buckeye in Illini country's picture

Long live the boycott of ESPiN!!!

Columbus to Pasadena: 35 hours.  We're on a road trip through the desert looking for strippers and cocaine... and Rose Bowl wins!

Hoody Wayes's picture

It's reassuring to know some are willing to publicly question ESPN's monopolistic tendencies. Perhaps, the WWL will trip the wire and find itself in Sherman Anti-Trust territory.

Hopefully, the NBC Sports Network (launching in January 2012) - will prove a viable contender.

doodah_man's picture

We are getting closer to what I have been saying all along. ESPN's relationship with a certain conference has all the trappings of fodder for an Anti-trust or Rico investigation. But hey, they are a "news network"....If ESPN, by its stories and reporting, can control perception, it can control who seeks football scholarships, coaching positions, fanbase, and ultimately revenue...which goes back to perception, ad nauseam. 

I once thought that they were merely an entertainment network that dabbled in journalism. However, it is now apparent that they are the PR firm for the SEC.

 

Jim "DooDah" Day
It is hard to play dirty against a man who picks you up.

Baroclinicity's picture

ESPN's nonsense is being exposed a little more each day.  The question is, can/will anyone do anything about it?

GlueFingers Lavelli's picture

I'm counting on NBCsportsnetwork. All it would take is a few billionaires to launch a major network. There are plenty of reporters, and former players that they could get.

I thought Fox would be all over this. A major network could take down ESPiN. Think of all the possibilities for NBC or Fox. Better National Coverage, Fox and NBC have NFL ties. I hope ESPiN goes down. I think the sports news monopoly is coming to an end soon. A major network would be the way to take them down. I'm sure ESPiN would press ABC into more time in their merger.

Dustin Fox was our leading tackler as a corner.... because his guy always caught the ball.

Jugdish's picture

Great article Ramzy. I was having a great day until I read this. I am so pissed at ESPiN that I want to pop someone in the mouth. I am an older guy and I remember all that we played for years ago was the conference title and the Rose Bowl. Now, we are nothing more than pawns in a chess game. I love college football and all the excitement that it brings, but money is making a mockery of the sport. I watched part of the 1st quarter of LSU vs. Ala and then I went to bed. It was making me sick to listen to all the BS.

Remember to get your wolverine spade or neutered. TBDBITL

timdogdad's picture

it's just shrewd businessmen taking care of their and the stockholder's best interests.  but forgoing any ethics, dignity, and truthful journalism along the way.   i keep flashing the nirvana album cover with the baby in the pool swimming after the dollar.  more than a fitting visual 

The_Lurker's picture

Nice job, Ramzy. ESPN's manipulations of college football are ongoing and ominous. For example, the WWL has its 'rematch' narrative firmly underway. The same exact pundits who openly and vociferously opposed a rematch between Ohio State and Michigan in 2006 are already supporting an Alabama-LSU rematch at season's end. The more they promote a rematch agenda, the more likely it will occur. And yet their arguments of 2006 (Michigan already had their shot and lost to Ohio State, Michigan didn't even win its conference, etc.) are nowhere to be found in 2011.

spqr2008's picture

Does ESPiN remind anyone else of "Tommorrow Never Dies"?  I know it's not the greatest Bond movie ever, but the whole "manufacturing a war" thing the media mogul does in it is the best movie reference comparison I can come up with to the way ESPiN is playing the puppetmaster with conference re-alignments.

Denny's picture

The hubris in Brisol is mind-numbing at times, but once you realize that it's purely entertainment/ad-driven rather than journalism-driven the world becomes a slightly saner place.

Being mad at ESPN for not delivering good journalism after not doing so for years is like being mad at the Browns for not delivering a good football team after not doing so for years - maybe you're just expecting too much from folks who are very obviously not going to deliver.

Taquitos.

jack's picture

Wow. Awesome post.  Excellent work.

theDuke's picture

mmmm mike leach.  how i'd love to have him on board for some OC duty.

theDuke

GlueFingers Lavelli's picture

Leach, maybe he can go to Purdue. I'd prefer a coach who knows the running game. Spread football is soft and inconsistant.

Dustin Fox was our leading tackler as a corner.... because his guy always caught the ball.

lhardeman's picture

I don't have the BTN, so I tried to watch the college football wrapup the next day on ESPN to get a few highlights of the game.  The first 10 minutes or so was dedicated to the LSU/Alabama game.  I understand it was a big game so i really didn't mind eventhough I really had no interest in the game.  They then did a quick countdown of the scores and highlights of the top 10 teams and then the Florida/Vanderbilt game.  And for no reason what-so-ever they did their court routine where Mark May and Lou Holtz argue about a topic.  Their topic was if Florida would still be relevant 4 years from now because they lost all their games in October.  Isn't this November?  They just won the game, why is this relevant?  Anyway after that mess they then interviewed Les Miles.  I had enough I didn't watch to see if they ever got to the OSU game or any other game.  I had enough.  I just don't understand how with a straight face these things happen and they don't see anything wrong with it.  Did I just miss the OSU highlights or did I dream that the whole show was basically about the SEC?

Bucksfan's picture

This whole mess could have been avoided if the rest of the country would just rise up and beat the SEC in some bowls.  I'd love to argue that the product on the field is relatively the same in other conferences, but the national championships just don't lend well to that side of the debate.  Until the Big Ten gives the nation something tangible to hang their hats on, we have no one else to blame.

The Big Ten needs to win more than 1 Rose Bowl per decade.  Needs to produce more than 1 true national power per year.  Needs some big non-conference wins.  Needs to win at least 3 of the 5 January 1st bowl games.  Nebraska's addition should help, but it can't just be Ohio State holding up its end of the bargain.  And even then, Ohio State's decade, while impressive, is still marred with 3 separate high profile incidents that negatively impacted national competitiveness due to players taking improper benefits.

Conference quality might be cyclical, but the Big Ten's current state has been a steady decline that doesn't look like it's over yet.  MSU is basically the same team that Alabama made look like a MAC team, Wisconsin is better than last year's team on paper and shouldn't have lost to MSU or a down Ohio State team, Michigan is still who we think they are, and Penn State is about to fall off a cliff.  Don't even get me started on Indiana or Minnesota (the Gophers used to win national titles, are you kidding me?!).

cal3713's picture

This is so true.  3 - 5 years ago I would bitch about an SEC bias, but fuck, they were right, the SEC is better than everyone else.  If another conference started competing regularly, ESPN would be right on top of that too...

GlueFingers Lavelli's picture

The SEC is the best becasue they don't give a shit about the product off the field. It's about money. The best football players are often the best football players because all they care about is football, just like the best students are driven in the classroom. The SEC lowers academic standards to lock in top talent. The Top recruits want to play there to get ready for the NFL, not to worry about being academically eligible.

People in the midwest typically hold athletes to a higher standard off the field. Football teaches life lessons. It turns boys into men. We hold our guys accountable in the "student" part of student athlete. It's that simple. I'd love nothing more than to see Andrew Luck go into New Orleans and beat LSU playing smashmouth football. Beating them with less talented players, but better people.

Dustin Fox was our leading tackler as a corner.... because his guy always caught the ball.

GlueFingers Lavelli's picture

Notice how quick an SEC team nabbed up Durrr-on Carter?

Dustin Fox was our leading tackler as a corner.... because his guy always caught the ball.

ShowThemOhiosHere's picture

Minnesota winning national titles?  I could never envision such a world.

All joking aside, there has been at least one instance of a B1G team beating an SEC team in a bowl over the past several seasons:

2010 - OSU over Arkansas
2009 - PSU over LSU
2008 - Iowa over South Carolina
2007 - TSUN over Florida (only time in my life that I was kind of glad TSUN won a game)
2006 - Wisconsin over Arkansas
2005 - Wisconsin over Auburn
2004 - Iowa over LSU

It goes back further (Florida losing to TSUN/Iowa in '02/'03).  You can comment on bad conference records in bowls, but I really don't think that conference quality differs that much.  It's about the individual bowl matchups.  It's about which team matches up favorably personnel-wise, talent-wise, as well as which team is more prepared and more motivated.  What does it tell you when OSU took ten tries to finally beat an SEC team in a bowl game, yet many years OSU beats B1G teams that go on to beat SEC teams in bowls?  What about when OSU has defeated SEC teams in the regular season?

I get irritated that bowl games get somewhat reduced to conference battles as opposed to battles between two individual teams.  That's just my opinion.  If people are so worried about conference matchups, then take your B1G first teamers and have them play a game against the first teamers of another conference. 

 

 

Class of 2010.

Menexenus's picture

2007 - TSUN over Florida (only time in my life that I was kind of glad TSUN won a game)

I agree.  That was an enjoyable game, and the only time I can remember that I actually rooted for Meatchicken to win.

 

Real fans stay for Carmen.

flipbuckeye's picture

And still be able to point and laugh at Mike Hart (2 fumbles).

BigBuck623's picture

It's worthy of mentioning that the concept of "shareholder wealth" was only invented in the 1980's - just a few years before the ESPN.  Note that even the wiki points out that maximization of shareholder wealth is not necessarily only short-term profit.

Companies can - and did - exist to promote long-term goals.  Once upon a time, the concept of a "corporate charter" had a meaning, and companies had to justify their existence to the city/state that allowed them to exist.

ESPN is not promoting "sports" [Ed: No politics, please. Subsequent replies have been deleted.]

Kalamazoo Steve's picture

Can someone explain the beef with the mothership and its coverage of the SEC? Wasn't the game of the century on CBS? Aren't most elite SEC matchups aired on CBS? So if you are a shareholder of ESPN, wouldn't hyping a game on another network be counter productive? Apparently not, but I don't see the issue. If we want more positive coverage of the BIG, our teams need to play better. Penn St has the best record in our conference and Bama housed them in Happy Valley. What do we want? Everyone saying how awesome the BIG is? Truth be told, if it wasn't for OSU this conference would be eating with the likes of the Big East for the last 10 yrs.

gravey's picture

I think congressional hearings are in order.  Anti-trust hearings.  Why not?  they do it for MLB and this is bigger.

Abe Froman's picture

Let's remember, ESPN doesn't have to answer to regulators therefore it would be much harder to pin anything on them.  I thought the ENRON spin would make it really interesting and I'm sure if Ramzy had more information regarding the ex-Houston giant, then it would even be more applicable.  Having worked with Enron employees and still knowing a few, I can say that there are good and bad ones as in any company.  The thing that set Enron apart wasn't that they did it for the shareholder, as the other Fortune 500 companies do (yes I work for one), they did it to line the pockets of the people at the top.  Sure, they got the stock price inflated based on mark to market accounting in addition to some false companies, but they also dolled out incredible bonuses to retain employees adding value.  Often in the form of shares of stock, these bonuses rivaled anything on Wall Street and surely inflated the self-worth of these employees when they marketed themselves to other companies.  Smarter than everyone else?  Nahhh, just more self-deserving. 

Is the ESPN network evil and about to collapse?  I don't know, are you still watching it?

Basking in the wake of mediocrity.....

Ramzy Nasrallah's picture

The parallel wth Enron was strictly regarding the conflict of interest that exists between ESPN's news and business development decisions. Enron was being consulted for and audited by Arthur Andersen which presented its own conflict of interest that is now no longer exlicitly possible via Sarbanes-Oxley.

I lifted the title of the Enron book because of that overlap, because it's bad ass and because I try to avoid writing my own titles.

fadeproof's picture

Good stuff Ramzy.  Thanks for continuing to fight the good fight.  

WMBuckeye's picture

1. If I handed out Pulitzer's for writing Ramzy would be the shoe-in!!

2. Totally encompassing B1G Ten Network only. eSECpn just disgusts me all over again.

3. How in the !@#$ can child sexual abuse be equally severe as Tatgate....absolute morons in the world. Where's the coverage on Penn State if it's just as criminal as tats for signed memrobilia??

 

 

Proud to be a Buckeye in SEC territory...Long Live the Vest!!
Class of 2003 OSU/ATI "Where the men are men, women are few and the sheep are scared.."

BigRedBuckeye's picture

Brian Rolle fumble recovery for a TD!!!

And we'll drink to old Ohio, 'Til we wobble in our shoes! 

Bucks43201's picture

ESPiN is famous for building people up...just to tear them down. All for ratings, publicity and money.

"You win with people." - Woody Hayes

GlueFingers Lavelli's picture

Tebow will be ESPiN's next guy they use. Then once he's gone, he'll be the example of what not to be as a pro QB.  oh yeah, lets get his coach.

Dustin Fox was our leading tackler as a corner.... because his guy always caught the ball.

3 Yards And A Cloud of Dust's picture

ESPN started with a great team and philosophy.  A bunch of sports junkies who were thrilled and humbled to be in a position to get paid to cover sporting events.

Obviously all that changed over time as their egos and revenues grew at a grossly proportional rate.

For me, ESPN is a necessary EVIL - even though I get BTN, many of the other sports, games, teams I follow are shown on their portfolio of networks.

However, I refuse to listen to, watch or support ANY of their sponsors.  Often times, I'll go exactly the other direction and even, occasionally, spend a little more just to support the competition. 

I'm only one person, and I know my financial decisions - relative to their advertisers - has a minimum impact.  ESPN could care about decisions at the individual level.

But, ESPN and their advertisers are driven by the almighty dollar - supporting other networks and/or non-ESPN advertisers is the only way our dissatisfaction with their business strategy could have any appreciable impact.

GlueFingers Lavelli's picture

I still think if someone were able to give them a run for their money, so many sports fans would tune in just for something different. As long as its a legit product, and maybe even un-biased, I think people would ditch ESPiN, and thier "scandal stories". 

College scandals get people to watch during the off season. That's the agenda of sports media, to keep you into the stories like a soap opera.

Dustin Fox was our leading tackler as a corner.... because his guy always caught the ball.