SBJ/February 7 - 13, 2005/SBJ In Depth

Year of the rights deal

A crew from NBC Sports directs coverage of a PGA event. Networks have had a difficult time making the numbers work in the current PGA Tour rights package.

The most consistent trend in sports media rights this year may be inconsistency. Four major media packages either are on the table or are heading into negotiations: the Sunday night-Monday NFL package (ABC-ESPN); the Sunday-Wednesday MLB package (ESPN); half of NASCAR (NBC and TNT); and the PGA Tour (ABC, CBS and NBC).

Each contract includes first refusal, an exclusive negotiating window for the incumbents or preference for incumbents, leaving would-be suitors waiting on the sidelines sometimes for months or a year. Aside from that and some network crossover, they have precious little in common.

Looking for a dollar trend based on last year’s deals? Don’t bother. Some people would like to think the double-digit increase the NFL pulled out of Fox and CBS portends a similar increase for No. 2 TV sport NASCAR when all it really indicates is a probable double-digit hit for Disney if it wants to keep the prime-time NFL package.

“It becomes sports specific and it depends a lot on the leverage a particular sport might have,” said sports media consultant Neal Pilson, who declined to discuss specific deals because he’s working with NASCAR on its upcoming negotiations. It’s about degrees of competition, scheduling, the time of year, ratings, cost per thousand and a host of other factors.

ESPN Chief Financial Officer Christine Driessen agrees: “There’s so much difference in which sport you may be talking about, there may be some leveling off, slowing of growth, increases in rights — the competitive environment, the economic environment, what people want to use sports for.”

For instance, the NFL, with the best ratings and nearly

Related information:

 

The Players

 

Major television rights deals in place

 

Rights in play

 

Turnkey Sports Poll

 

Busy 12 months for TV rights holders
unmatched market power, is literally in a league of its own. That’s why it manages to draw increases even when partners lose money, and why it can find takers when others walk away.

Then there’s a factor that’s almost intangible when you’re dealing with events that really aren’t fungible. “The unique thing about sports properties, unlike entertainment when you can get another actor, another show — there’s only one PGA Tour, only one baseball and you don’t have a chance a week later and you may not get another chance for four years,” said Rob Correa, senior vice president of programming at CBS Sports.

Pilson added, “It’s hard to extrapolate from what has happened to what’s going to happen.”

But, in a way, that’s what nearly everyone involved tries to do. They build models for every possible scenario based on a mix of past performance and all those factors.

NFL

ABC and ESPN reportedly have until October to come to terms with the NFL, and then the package would be

CBS has already extended its NFL rights package, a deal that lasts through 2011.
up for grabs. Odds are in favor of an early settlement. Some rumors had an announcement coming during the week leading up to the Super Bowl that would keep the package at Disney with a minimal increase from ABC and double digits from ESPN. If the odds are wrong, nearly every broadcast network with the exception of CBS, which has little reason to muck around with its prime-time schedule, would be considered a possible candidate for at least part of the package. Another possibility would be a Thursday-Saturday package.

Then there’s the Bornstein factor — the possibility that the NFL might be willing to forgo guaranteed gratification and put some games on the NFL Network headed by NFL broadcast guru Steve Bornstein. But the NFL Network is far from fully distributed, one of the major risks any league faces when trying to use its own network for leverage. It’s hard to believe the NFL would forgo the income from any of the prime-time games.

ESPN’s Driessen would only repeat the network mantra that “we’re in negotiations.” NBC and Turner are both on the record with interests in football; NBC could team up with NBC Universal sibling USA. Fox wouldn’t mind more football at the right price, especially if it came with cable rights.

PGA Tour

With ratings and advertiser interest dropping from the go-go years during the height of Tigermania, Commissioner Tim Finchem and crew will have to be creative and persuasive to stay in place, let alone make any real gains.

One network executive said the problem isn’t the league or even the difficult sponsorship and advertising market, it’s the high price television is paying for the current contract. Another said, “It’s going to be a challenge because of the past couple of years from the ad perspective.”

Paradoxically, this puts the current networks in a better position. “When you’re losing money, you have leverage,” said Barry Frank, vice chairman at IMG/TWI.

The current deals with ABC, CBS and NBC run from

The PGA Tour must convince networks that a new rights deal would be money well spent.
2003 through 2006, but were made in the summer of 2001 against a backdrop of ratings boosted by Tiger Woods. Scant weeks later, the events of 9/11 tilted the world. The financial industry, traditionally a major supporter of the tour, suffered significant losses followed by a series of financial scandals that turned some sponsors into ostriches while others simply disappeared. The advertising market was depressed.

The combination sent those deals, which were calibrated for a narrower margin than previous contracts, into the red. The last contract won the tour a 40 to 50 percent increase in rights fees. The networks would like to see a return to the days when the PGA Tour consistently turned a profit instead of what one executive describes as tens of millions of dollars lost across the board.

Gil Kerr, senior vice president of broadcast and programming for the PGA Tour, can’t help sounding a tad Pollyanna-ish as he stresses his belief that the results will be different this time. He cites the replacement of the 18 sponsors who left post-9/11, renewed interest from the financial sector and more demand than inventory.

“In the last negotiation, we narrowed their margins but we expected there to be a margin,” said Kerr. “We’ve seen in the past couple of years they’ve been challenged by the economy. We think in the future there would be a margin again. We believe the PGA Tour can and will make money.”

If so, it would be one of the rare major packages that actually brings money to the bottom line.

The tour talks to its partners first but has the freedom to look at any offers. Turner would be interested in picking up part of the PGA Tour, but only four-day packages or Saturday and Sunday, according to Turner Sports President David Levy. Traditionally, with few exceptions, golf rights are sold in a Thursday-Friday package for cable, with weekends reserved for over the air. “With Turner’s philosophy focusing on premium sport events, we’re not interested in a Thursday-Friday-only sports package,” Levy said.

NASCAR

NBC and Turner executives are upfront about wanting to maintain their three-way deal with NASCAR, which in turn has said it really likes its partners and wants to stay with them. Sound easy? Far from it. Mutual respect helps when the starter’s pistol pops but that doesn’t mean everyone is gunning for the same finish line.

“We are very interested in renewing our NASCAR deal,” Levy said. “Certainly it’s been a good relationship for all of us.”

The joint venture has an exclusive one-month window in December. The networks have had conversations with NASCAR about starting negotiations earlier, but nothing has been settled. “We don’t want to go up to December,” Levy said. So far, there’s been chatter about what some of the needs might be for both sides — more prime-time races, where New York might fit in down the road.

Just to muddy the waters, the Fox-NASCAR deal runs through 2008, but NASCAR has an opt-out clause at the end of 2006 that would allow the restructuring of all broadcast rights at the same time.

Then there’s ESPN, which nurtured racing only to lose it on the last pass. George Bodenheimer, president of ESPN and ABC Sports, has said he wants it back. IMG’s Frank said, “He’ll tilt it by the degree of his interest. Talk is cheap.”

Will ESPN be willing to meet NASCAR’s financial goals this time? Only if they mesh with ESPN’s economics and needs. If ESPN were to walk away from the NFL — the one unthinkable on most lists — NASCAR could become more necessary, hence more valuable to the network. More money would be available.

ESPN has shown before that it’s willing to walk. That’s why it doesn’t have NASCAR now and why Disney won’t have the Bowl Championship Series.

MLB

The broadcast networks don’t want a prime-time

ESPN’s current deal with Major League Baseball cost an estimated $851 million.
regular-season baseball package. Turner already has the right to as many as 90 exclusive games a season and so far no other cable networks are an obvious fit. Under its current deal with MLB, baseball fills hundreds of hours for ESPN. Despite the apparent lack of interest by other cable networks in the Sunday-Wednesday package, that doesn’t mean a new ESPN deal with MLB is guaranteed.

Baseball can rattle the sword of its own channel; league executives have said they aren’t planning to carry live games but could adjust the plan if they can’t get what they want from ESPN. Other cable networks, such as USA, may factor in.

“ESPN really needs it,” said Kagan Research senior analyst John Mansell. “But at some point they’re going to say it’s not worth it.”

The current 2000-2005 deal cost ESPN an estimated $851 million. MLB’s first offer reportedly stripped the package to the bare broadcast rights, a sure no-go for a company publicly committed to acquiring rights that cover all of its media. This one could go down to the wire.

Staci D. Kramer is a writer in Missouri.

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