SBJ/20081117/This Week's News
Is cable the new home of champions?
Published November 17, 2008
Sports television is on the cusp of a seismic shift if the BCS follows through with its plan to spurn the power of broadcast television and put all four of its bowl games on ESPN, the cable channel that reaches 20 million fewer homes than the major broadcast networks.
What makes this shift significant is not just that ESPN appears poised to outbid Fox by a startling $100 million over four years to secure the annual marquee bowl games. It’s that if ESPN’s bid is accepted, none of the broadcast network sports departments would have mounted a significant bid. Though Fox was the incumbent and CBS and NBC air college football games regularly, none appeared able to come close to the price being bandied by ESPN.
The future impact is clear. As sports properties continue to sell their rights to the highest bidder, it’s becoming increasingly evident that there are fewer bidders at the table. And those bidders increasingly are coming from cable rather than broadcast.
It appears the broadcast networks can’t and won’t compete with ESPN’s or Turner’s dual revenue stream of affiliate fees from cable operators and advertising fees, especially given the current economic conditions.
The fourth quarter ad market has been soft across all sports, putting greater importance on the affiliate revenue that cable networks collect. Plus, broadcasters’ parent companies have seen their stock prices drop sharply from the beginning of the year, with CBS falling 75 percent, News Corp. dropping 63 percent and GE falling 53 percent. Disney, by comparison, has seen its shares drop 32 percent.
At deadline for this story late last week, the BCS deal hadn’t been finalized, and Fox still had the right to match any offer until today. But most executives familiar with the discussions believe that a broadcast network that depends solely on ad revenue, like Fox, cannot match the amount a cable channel like ESPN can put on the table.
The Rose Bowl is negotiated separately from the other four BCS bowls and has a deal with ABC/ESPN that runs through 2014. If ESPN wins the rights to the other BCS bowls, it would trigger a clause in its Rose Bowl contract that would allow it to take the game from its home of 21 years on ABC to the cable channel.
If the deal is completed, and all signs suggest that ESPN will wrap it up soon, the BCS would become the biggest property to play its marquee games entirely on cable TV.
And viewers should be braced for further moves. At Disney, which owns all of ABC and 80 percent of ESPN, sports events steadily have migrated from the broadcast network to the sports flagship during the last several years. ESPN executives are frank about stating their wish to pull more high-profile sports off the broadcast network.
“It is a nice old-fashioned notion that you need your championship on broadcast,” said a senior ESPN executive, who asked not to be identified due to contractual issues with various leagues.
Disney’s sports-on-cable strategy started two years ago. That’s when Disney moved “Monday Night Football” from ABC to ESPN, and declined to bid on the Sunday night prime-time broadcast package.
That was also the year when ESPN officially became Disney’s sports brand, and ABC Sports was rebranded as “ESPN on ABC.”
But the trend accelerated last week.
First, Disney made a not-so-subtle statement when it moved the end of one of NASCAR’s final races in its Chase to the Sprint Cup from ABC to ESPN2 to allow the broadcast network to air “America’s Funniest Home Videos.”
Two days later, news leaked that the BCS was considering allowing ESPN to carry all of its bowl games, including the BCS title game.
Privately, BCS officials say they are not concerned by the fact that ESPN doesn’t command as big an audience as the broadcast networks. According to one executive who asked not to be identified because the deal has not been completed, several factors steered the BCS toward ESPN, in addition to the extra $100 million ESPN was offering.
First, there’s the federally mandated digital transition coming in February 2009, when broadcasters have to turn off their analog signals and go all digital. Cable executives believe the switchover will cause many broadcast-only homes to begin subscribing to cable and satellite services. At an investor conference earlier this fall, Comcast President Steve Burke said his company could see an increase of 3 million subscribers thanks to the transition. So, by the time this BCS deal starts in January 2011, the gap in households between broadcasters and cable/satellite channels will narrow considerably from the current 20 million homes that don’t get cable or satellite, BCS officials believe.
Plus, BCS executives were heartened by news that the British Open would shift exclusively to ESPN starting in 2010 (see SportsBusiness Journal, July 21-27 issue). That soothed fears that the BCS was flying solo in moving exclusively to cable. Rather, it proved that the BCS would be part of a trend of big events migrating to cable, the BCS source said.
While various sports events and regular-season programming has shifted to cable since the NBA moved the bulk of its schedule from NBC to ESPN for the 2002-03 season, the top U.S. sports leagues are not anxious to follow suit with their championship events.
Sources from the NFL, MLB and NBA all told SportsBusiness Journal last week that they are not willing to allow any cable channel to carry their final championship games, at least not yet.
Of the three, the NFL is the biggest proponent of broadcast television and still is committed to carrying all of its regular-season games on over-the-air broadcast television. Commissioner Roger Goodell credited this policy with helping the league grow.
“We’re unique among leagues in doing that,” he said earlier this month.
The NFL ensures that even games on ESPN and NFL Network are carried on over-the-air stations in the local markets, a policy that the BCS is not likely to share.
MLB and the NBA have made more inroads with cable television, even putting more playoff games on cable in the last couple of years. TBS has carried one of MLB’s two League Championship Series for the past two seasons, and the NBA has allowed TNT and ESPN to carry its conference finals since 2002. The NBA also puts one of its season highlights, the All-Star Game, on TNT.
While the NHL and MLS have their championships on broadcast TV, sources with both leagues believe that it is inevitable that major championships will migrate to cable. Though MLS still prefers that its MLS Cup is on ABC, the league’s Dan Courtemanche said the move of his league’s marquee All-Star game from ABC to ESPN has been successful.
“Our sponsors like it, ABC/ESPN likes it and we like it,” he said. “We haven’t seen any negative aspects to our decision.”
Staff writers Michael Smith and Tripp Mickle contributed to this story.