SBJ/July 17 - 23, 2006/This Weeks News

Fox’s call for change pays off

What began nearly two years ago as a simple attempt by Major League Baseball to extend its national broadcast TV deal with Fox Sports has resulted in some of the most dramatic changes in the sport’s televised history — with more yet to come.

MLB’s twin seven-year contracts with Fox Sports and Turner Sports, announced last week during the All-Star Game festivities in Pittsburgh, are worth more than $2.5 billion combined and provide the league with a great deal of financial stability. Additional deals for the League Championship Series games not purchased by Fox and a 20-game regular-season cable package will push that total beyond $3 billion.

The effects of these long-term agreements will be seen next year, most notably with a change in the start of the World Series from a Saturday to the first Tuesday after the conclusion of League Championship Series play; an expansion in MLB’s national weekly presence during the regular season; a shift of the League Division Series playoff games to cable, via Turner; and the almost-certain move of part of the LCS to cable.

“These really are landmark deals for us,” said MLB Commissioner Bud Selig. “It’s hard to be happier with how this all turned out.”

Some of these changes were years in coming. Both Fox and MLB long have sought to change the World Series schedule in order to avoid four weekend games but have found navigating more deeply into the network’s entertainment programming schedule easier said than done.

Fox thinks shifting the start of the World Series
to avoid weekend games will help it reach more viewers.
Other moves, however, were driven by necessity. With Fox insisting on lowering its annual fee as a means to avoid a repeat of the $225 million in write-downs in its current, six-year deal with baseball, MLB had little choice but to carve up the inventory into more pieces.

Along with that came a need to soothe tough talk from Fox and other suitors. As recently as mid-May, News Corp. President Peter Chernin said Fox would walk away from baseball if a deal could not create profits for the network. Chernin’s tenor was mirrored by executives from NBC and Comcast/OLN, put off to varying degrees by MLB’s financial demands.

Two key actions helped MLB work through Fox’s concerns: Selig steadily negotiating with Chernin, and MLB President Bob DuPuy having lunch in San Francisco about a month ago with Fox Sports President Ed Goren and Fox Networks Group President Tony Vinciquerra.

“I went out there to see my granddaughter, and they were good enough to fly up the coast to see me while I was there,” DuPuy said. “And it was there we all laid out a desire to really work through this and finally get it done.”

Said Vinciquerra, “We spent the better part of two years negotiating, and we simply were not going to do another deal and lose money. But we continued to talk, were very honest about where we all were and got it done. This is a great deal for us.”

That lengthy negotiating with both Fox and Turner brought several additional programming and structural changes:

  • An expansion of Fox’s Game of the Week schedule from 18 games to 26 games, and a shift in the start time of those games, from 1 p.m. to 3:30 p.m. ET;
  • The creation of a non-exclusive, dedicated Sunday afternoon slot for Turner to form an extended national presence along with ESPN’s existing “Sunday Night Baseball” coverage; and
  • The inclusion of a fantasy sports license for FoxSports.com with MLB Advanced Media, joining ESPN.com, Yahoo! Sports, CBS SportsLine.com and ProTrade.

Selig negotiated steadily with
News Corp. President Peter Chernin.
Fox retains the rights to both the World Series and the All-Star Game as part of its new deal. It will air the American League Championship Series four times over the course of the deal and National League Championship Series three times.

The deal also allows for some of Fox’s Game of the Week contests to be moved to prime-time, but Vinciquerra said the precise structure by which games would be selected and moved has not been determined.

Fox’s retreat from owning the LCS games exclusively or any Division Series games at once addressed two issues for the network: lowering its annual price for MLB and easing internal tension with network entertainment-side executives not emotionally wedded to baseball.

Networks such as Fox and NBC have long struggled with playoff baseball, which obviously can bring big ratings but also disrupt fall prime-time schedules. More specific to the LCS, ratings for that round of the playoffs have shown to be quite variable. Epic series in recent years involving the New York Yankees and Boston Red Sox produced huge audiences while last year’s matchups involving Houston-St. Louis and Chicago-Los Angeles produced far smaller results.

With the Fox and Turner deals now finished, MLB executives expect the rest of the TV landscape to develop in short order. While Fox could still acquire the other
unsold portion of the LCS, ESPN and Turner have each expressed interest in adding those playoff games and are considered strong bidders for the coverage.

More dramatically, MLB sees the unsold inventory as a potential means to jump-start the long-delayed Baseball Network. The venture, at one point pegged to hit the airwaves at the start of this season, has been put off for months while MLB first sorted out the primary broadcast contracts.

Digital rights are not part of either the Fox or Turner deal, beyond the fantasy license for FoxSports.com, providing yet another revenue opportunity still to be realized.

In the meantime, MLB must begin to tweak its scheduling to accommodate the change in slotting of the World Series. Among the possibilities are a slightly earlier start to the season and an end to the traditional Sunday conclusion of the regular season.

Additionally, MLB must sell the concept of placing more playoff games on national cable. The Turner deal does not involve a broadcast simulcast for local markets.

“As time goes on, more people, particularly our younger audience, simply sees no differentiation between cable and broadcast,” DuPuy said. “They’re all channels on the dial, so to speak, one moving into the other, and Turner’s good penetration within the cable market makes it that much more viable.”

Recent MLB TV ratings

 
Avg. rating/share (no. of games)
2006
2005
2004
2003
Regular season
Fox
2.4/7 (8)*
2.6/7 (18)
2.7/7 (19)
2.7/8 (18)
ESPN
1.2 (57)*
1.0 (101)
1.1 (86)
1.0 (87)
ESPN2
0.8 (18)*
0.6 (47)
0.6 (66)
0.5 (61)
World Series
Fox
-
11.1/19 (4)
15.8/26 (4)
12.8/22 (6)
League Championship Series
Fox (AL)
-
7.0/12 (5)
11.7/20 (7)
10.7/20 (7)
Fox (NL)
-
7.0/12 (6)
8.0/15 (7)
10.9/19 (7)
League Division Series
Fox
-
6.6/11 (5)
5.3/9 (6)
7.5/13 (5)
ESPN
-
3.8 (8)
3.5 (9)
3.9 (9)
ESPN2
-
3.2 (2)
2.3 (1)
2.8 (4)

Note: Cable marks are coverage-area ratings, and related share information was not available.
* Through July 9Sources: Networks, Nielsen Media Research, SportsBusiness Daily archives

Recent MLB TV deals

Network      
Contract period
Rights holder
Total rights fee
Avg. annual value
2007-2013
Fox
$1.8 billion
$257 million
2001-2006
Fox
$2.5 billion
$416.7 million
       
Cable      
Contract period
Rights holder
Total rights fee
Avg. annual value
2007-2013
Turner
$700 million
$100 million
2006-2013
ESPN
$2.37 billion
$296 million
2000-2005*
ESPN
$851 million
$141.8 million

Note: From 1996-2000, MLB?s TV deals with Fox, NBC and ESPN were valued at $1.7 billion, averaging $340 million annually.
* Terms of the deal replaced the terms of the previous MLB deal for ESPN for the 2000 season.
Sources: MLB, networks, SportsBusiness Journal archives

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