Week in Review
Former Sky TV CEO John Fellet’s new salary: $1
Recently-retired Sky TV chief executive John Fellet talks to Newsroom business editor Nikki Mandow about baseball, media, goldfish, Pepsi, and more baseball
Four truths and a lie about John Fellet:
He grew up on an Arizona ranch, grandson of Italian immigrants, and was the first in his family to go to university.
He got hired for his first job, as an accountant for Arthur Anderson, because the recruiter remembered watching him getting an impressive home run for his university baseball team. He got fired from that same job a year later after putting two goldfish in the water cooler.
Over his 28-year tenure at Sky, which finished when he resigned in February, he offered to buy MediaWorks three times
The 66-year-old drinks considerable quantities of Pepsi every day. Always has. It's possibly linked to receiving a scholarship from the soft drinks company for his last two years at Arizona State University. He calls that “the best investment Pepsi ever made”.
Having taken home almost $2 million in the last of his 28 years at Sky, his new job as CEO of Baseball New Zealand pays just $30,000.
The lie of course is the final one. John Fellet doesn’t earn $30,000.
He earns $1.
This extraordinary deal, aimed at bringing Baseball NZ back from the financial brink, has also involved Fellet making a not-inconsiderable investment in the organisation. An investment he hopes he’ll get back. Maybe. Some day.
But even if he doesn’t, Fellet reckons it’ll have been worth it. Payback for a lifetime of enjoyment from America’s national game, as player, coach (his New Zealand teams won five national championships), organiser and spectator.
As a by-product, investing in Baseball NZ means he gets to own part of New Zealand’s only professional baseball team, the Auckland Tuatara.
Player, coach, organiser, spectator, manager, owner.
He also gets an office in corporate box 205 at North Shore’s QBE stadium, where he can keep a close eye on construction of what he reckons will be the best baseball pitch in Australasia.
Auckland Council, which owns the stadium, is spending $2 million ripping out most of the seats in the West Stand to make a pitch big enough for baseball.
For non-aficionados, baseball needs a diamond-shaped playing space, which can be fitted into a cricket pitch, but not a soccer or rugby field.
Oh, and they’re building one of those cool, tall outfield walls some of the American clubs have. It’ll be teal, like the Tuatara club colours, if not the reptile.
The deal means Auckland Council gets some not-insignificant extra revenue from a new code using its mostly-empty North Shore stadium.
Fellet gets to watch the diggers.
He says it feels good - and bad - being out of media, the industry that’s occupied him for more than 40 years - since the goldfish prank got him thrown out of the accounting profession (which he hated) and into pay-TV, which he loved.
He misses the corporate luxury of a bevvy of (other) accountants to handle putting the annual budget together. Even though Baseball NZ has a comparatively minuscule budget ($500,000, versus Sky’s biggest-ever year of over $900 million), Fellet has to crunch the numbers himself.
Without even a goldfish as distraction.
Negotiating content deals was like playing poker, looking around, saying ‘What options do the other side have, what options do I have, how do I determine value’?
Even more, Fellet misses the cut and thrust of negotiating content deals.
“It was like playing poker, looking around, saying ‘What options do the other side have, what options do I have, how do I determine value?’ Thinking about future deals; if he or she knows I’m paying x for something, will I get better deals on other stuff?”
These days he gets his fix from consulting to sports networks and other pay-TV channels about how to work out what content is worth.
“It’s the easiest thing in the world to win content - you just raise your offer over everyone else’s,” he says. It’s building a business model around what you end up paying that’s the hard part.
Fellet remembers at least two different networks that outbid Sky for sports content, then went out of business.
The jury is still out whether Spark can turn an almost-inevitable loss on its Rugby World Cup rights win into a sustainable sports content business.
What Fellet doesn’t miss is the up-front-and-tweeting sort of leadership he was increasingly seeing in rivals.
“You’d never see me sending a tweet out. I’m not great on-air talent. If I had something interesting to say I’d be happy.”
Actually, Fellet is a great storyteller, mixing the openness that is stereotypically associated with people from the US, with the self-deprecating humour of his adopted country.
Like when he compares his “missionary work” promoting baseball to Kiwis in 2019 with launching pay-TV in New Zealand in the early 1990s.
Fellet remembers getting to Auckland a month before his wife and their two young children. He set off to look for a rental.
“I found this house in Mt Eden, in a cul-de-sac, just perfect. I filled out the paperwork, practically got the keys. Then the realtor calls me back saying he has more houses lined up for me to look at. And I say ‘What do you mean; I’ve got a house’. And he says ‘The landlord rejected your application’. And I ask ‘Was it something I said?’ He says ‘No, he found the Yank entertaining.’ So why did he turn me down?"
Turns out, the landlord had found out what Sky was - a pay-TV station up against three perfectly good free-to-air channels. He reckoned Sky must be a hoax, and Fellet would never be able to pay the rent.
“He basically thought someone was playing a joke on me. He didn’t want to have to evict me and my young family.”
Death of traditional TV
These days, almost 30 years later, an explosion of paid, on-demand content means it’s “linear TV” (where one programme follows another) which isn’t likely to survive, Fellet says.
In the meantime, everyone’s on the back foot.
Sky TV and TVNZ both suspended their dividend in August, for the duration. MediaWorks’ television arm has been only sporadically profitable over the last three decades. Even TV success story Netflix lost $3 billion (yes, billion) last year, if you take into account what it spent on original programming. The California-based media and production company expects to burn through another $4 billion this year, borrowing money to pay for content.
“Netflix’ profit and loss has to scare you a bit,” Fellet says. “There are years Sky made more money than they did. And now companies like Disney and Apple are wading in.”
He thinks the shake-up in New Zealand’s TV industry could take another five years, but in the end, on-demand television will go back to being profitable. And the battle for sports content will continue.
He doesn’t see sporting codes marketing their content directly, or at least not exclusively.
“It’s too much of a risk because it will take years before they make money.”
The future for baseball in NZ
Fellet says the organisation got into financial trouble because baseball is growing fast in New Zealand. Setting up the Tuatara professional team to play in the Australian Baseball League last year was expensive, and ticket sales at the old McLeod Park ground in Te Atatu couldn’t cover costs.
But he likes the new job. Being immersed in baseball is like sliding back to home plate. From his first games at the age of six in the late 1950s, “my sole purpose in life was to become a professional baseball player”.
There were guys better than me who bounced around in the minor leagues. I was lucky enough to be less talented than them.
He nearly got there too. A baseball scholarship got him to university and he had a coveted place on the Arizona State University team.
But he just wasn’t quite good enough to be picked up by the recruiters, he says. “I was sitting on the bench too much for a scout to find me.”
And in the end that was probably a good thing, Fellet says.
“There were guys better than me who bounced around in the minor leagues. I was lucky enough to be less talented than them.”
Meanwhile, he had hoped to be able to retire from his Baseball NZ CEO role by Christmas, but more likely it will be early- to mid-2020.
Fellet says he’s been approached about a couple of directorships, but has no wish to go back into the corporate world.
“It’s all I can do to get through my own board papers.”
He might be tempted by a start-up though. He went along recently to an event hosted by Auckland SME business growth not-for-profit Icehouse, where entrepreneurs presented to potential funders.
“I’d be far more interested in that.”
In the meantime he’s got three retirement goals: become a full-time coach; take Italian lessons to drag up the language he heard all around him as a child; and learn how to cook French food.
So far, Fellet has achieved precisely none of those goals. Maybe next year.