MEMORANDUM

TO: Content Staff FROM: John Skipper DATE: 07/16/2007

SUBJECT: May '07 Town Meetings Q&A Follow-Up

During our May Town Meetings, there were several questions that I was unable to answer. All of the replies below are from various department heads, who were able to address those particular questions.

Question:

I am very surprised about the lack of adequate training and guidance for new employees. At least in my department, the training on everything from the publishing system, to SAP, to compliance training is very inadequate. Does the company plan to address this? I think if new employees are given better training and mentoring, we would retain more employees, and this would obviously benefit the company in the long run.

Answer:

In the past year we have revamped new hire education and have created two classes: Rookie Camp and All Stars. Both are designed to provide foundational information for new employees. If there are questions around the content or the quality of these sessions or if you have further suggestions, please send specific questions to the training team. Josie Paruta is in charge of the new hire experience.

Translation: We've got 2 cleverly named orientation courses, what more do you want?

Question:

According to a Securitas company performance expectation memo found by a copying machine in the Digital Center, it is quoted as stating: "Do we want you, (security), to come to work even when you're sick? Yes, we do. We want every employee to be at work every day." Understandable that Securitas would want their security guards at work every day, however, I do not think it's right to demand that security guards need to be on ESPN campus, and in our buildings, when they are really sick. This opposes ESPN's sick policy, even though Securitas is an outsourced company. Do you agree that the sick policy for security guards can directly affect ESPN employees' exposure to sickness and that the policy is too strict? If so, how should this be handled?

Answer:

Security was not aware of this memo and will address the concerns it raises with Securitas to understand its full context. Security will certainly express their concern for the well-being of all on our campus and how illness can affect our employees. We appreciate this being brought to our attention.

Translation: Just pretend you didn't see that.

Question:

What's being considered as the next big content initiative that we need to get at the top of our priority list?

Answer:

Near term is the NASCAR Nextel Cup and specifically the Chase. The company has done a great job getting up to speed with the Busch series, NASCAR NOW and our ESPN.com NASCAR content, and soon attention will need to turn to exceeding viewership targets for the Chase. Longer term, SportsCenter and continuing its evolution is essential. The growth of SportsCenter as a brand is crucial and as we look to make the show portable to various digital platforms and international territories, while making certain that the content continues to live up to and exceeds fans expectations. Additionally, expanding and growing some of our other key studio programming franchises with on-line extensions will be a key focus.

Translation: We're going to continue to ram this bullshit down the throats of our viewers for the foreseeable future.

Question:

Why does it seem that the motto of "Pay for Performance" is just a gimmick? It seems that the motto should be "Put in your time and you may get a raise." Even though there are many members excelling in their positions, it seems as though there are a very limited amount of promotions or raises being given. Those that are given a raise or promotion only seem to be those who "Deserve it for their time" meaning they have been here longer, even if they are not performing as well as a new employee.

Answer:

The best avenue to understand how a person in your area can move up the career ladder is to speak with your manager. They can share with you the expectations of the role and share the job family grid which outlines the career progression for a group of jobs. You may also want to review the competencies in the Performance Connection with your manager to further understand what is expected.

Translation: Welcome my son, welcome to the machine.

Question:

Can you please explain what happened with the previous security vendor? I heard that all of the security guards lost their jobs here without an opportunity to return once a cheaper vendor put in a bid. I feel that this was not a good example for ESPN to set - even though they were not employees they were still integrated in the community and it felt like a bad way for them to go.

Answer:

The security contract for our campus was put out to bid and Securitas secured the work. The bidding process saved the company a substantial amount of money. The fact that the guards from the previous company were not allowed to remain was due to the previous company's policy prohibiting them from working for another security company at ESPN for a period of one year. ESPN was not involved in any way with that decision.

Translation: ESPN dumped their security provider (essentially firing all the employees), replaced them with a company with questionable labor practices, made a huge chunk of cash in the process (diverting money from the workers paychecks to the portfolios of Disney stockholders), then denied they had anything to do with the employees being fired.

Question:

With the switch to Verizon for ESPN phone content, will our company phones, (Treos), be switched to Verizon?

Answer:

There are no plans to switch to Verizon. Verizon does not offer international coverage and it would be a lot of work to constantly swap a Verizon phone for a Cingular phone based on international travel. It also would require two processes to manage the phones, one for each vendor. Currently our rates are the same, if not better, with Cingular.

Translation: Trust us, you don't want that crappy service.

Question:

Is there or could there be an option to receive a pay check once a week instead of every other Thursday? Many of us live pay check to pay check. Being able to be paid every week would help tremendously.

Answer:

All ESPN employees are paid on a bi-weekly basis and have the same pay date. Payroll is a shared service provided by our parent company and ESPN cannot operate under a different system.

Translation: Bow down to the Mouse.

Question:

It seems like Ad Sales is running the show these day. We are constantly trying to make good commercial inventory liabilities by increasing commercial time and converting most of our promo time. "This can not be the best way to increase ratings and serve the fan." What can be done to prevent these shortfalls from happening in the future? Is there a way to decrease commercial time and increase the rate per commercial? Speaking as a fan, it seems like SportsCenter and our NASCAR coverage is constantly in a commercial break, which is really not a surprise since these two properties have more commercial time/hr. than most other events.

Answer:

The ratings we guarantee to our advertising partners are based on previous year's performance. Limiting our exposure to liability is predicated on our ability to maintain and or improve the ratings performance of our programs from the previous year. We do account for underperformance by setting aside a certain amount of our inventory for audience deficiencies; so there is a certain amount of hedging involved so we do not have to increase commercialization and lessen the fan experience.

We also want to capitalize on the marketplace demand for our networks. On certain occasions, we do ask for promotional time to be converted to national advertising time to maximize our share of the demand. Hopefully, we mitigate that by returning advertising time in return during periods where we deem the demand to be not as strong.

Balancing commerce and content is never an easy task. Our networks continue to offer the least cluttered environments on television. ESPN, ESPN2, Classic, and News make up 4 of the top 5 networks in least amount of non-program time per hour, across the top cable networks for delivering

Answer: (cont.)

men. We also have the shortest commercial pods on television, which is part of the reason why we continue to be on top of the marketplace in terms of pricing.

We have an ongoing communication among marketing, production and programming designed to ensure that when we have lower demand we give advertising inventory to promotion. Winter X games being a prime example of that process in action.

As it relates to the concept of raising prices and cpm's and decreasing the number of commercials, our "Exclusive SportsCenter" is an excellent example of just that... 50 percent fewer commercials in those shows, (from one advertiser), with price increases of 20 percent per unit, plus more investment in all of our media beyond just the prices for those units as a deal point.

It is most important to also consider introducing the concept of average commercial ratings being a currency we will be measured by in the next year as a key metric going forward. So as a company priority, the concept of "game changing advertising solutions" including improving our commercial average rating is where our business is going next.

Translation: It's tricky business watering down content with ads without driving the audience away, but we've got a room full of MBAs working on it.

Question:

As we continue to negotiate long term deals with rights holders, such as NASCAR, we're taking on more and more ancillary programming that is of average or lower Daypart rating and is not profitable for the company. At the same time, we're squeezing out other smaller but profitable sports that meet or exceed Daypart ratings. Are we concerned that we're devoting too many hours to motors programming?

Answer:

Recent deals, (NFL, NASCAR, NBA), have in fact included far less ancillary programming commitments compared to previous contracts. Regarding the increase in other motor sports programming, we made a decision to add some content, particularly in weekday afternoons, to further cater to motor sports enthusiasts and provide compatible lead-ins to NASCAR Now.

Translation: Like I said before, we're ramming this NASCAR bullshit down our viewers' throats whether they like it or not.

Question:

Will we be hiring more people to handle the work that won't get done or to make sure that product quality does not go down now that there is such a major focus on cutting overtime hours? ESPN has created a culture of people that have the work ethic to get it done, get it done right, no matter how long that takes. I don't think just because OT is being cut that this mentality will be so easy to erase.

Answer:

We use multiple factors when considering staffing numbers and continually evaluate the relationship between cost, staffing numbers and quality of life. Information such as that provided from the Employee Opinion Survey and continual feedback from employees and our fans help us make the best decision on staffing. If you have specific suggestions on how we may approach staffing in a new way, please let your manager know.

Translation: We're just going to hire people who don't mind working long hours without overtime compensation.

Question:

I understand that people will always complain about salary. I don't think the pay is an issue. However, I do think vacation time is. If we are the "gold" standard for cable, why do we get the same amount of vacation as retail and fast food employees? A little more vacation may lead to less burnout and fresh minds and actually save the company money. If the answer is Disney, aren't there ways that managers can circumvent that reasoning and provide comp days?

Answer:

We are part of the Disney benefits package and follow their policies. We do not advocate managers going outside the system. We want all employees to be treated in the same manner and allowing individual managers to create comp day arrangements would not be equitable across the company. Disney is currently reviewing many of the benefit offerings, and vacation is one area. As we get more information on the progress of the Disney team, we will let you know.

Translation: Again, bow down to the Mouse.