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If the NFL gets its way, this Thursday’s appearance in a Minnesota federal court — to contend that league media fees should flow even during a lockout — will be its last there.
While the public scrutiny surrounding next week’s likely expiration of the NFL collective-bargaining agreement largely centers on the league’s effort to win financial rollbacks from the players, the owners are just as intent on ending 18 years of federal judicial supervision of the labor agreement.
In fact, the NFL in its charge filed last week at the National Labor Relations Board cited the NFL Players Association’s insistence on retaining federal oversight as evidence that the union did not want to seriously negotiate. The union, the league wrote to the NLRB, “is conditioning contract proposals on the NFL’s agreement to a nonmandatory subject of collective bargaining, i.e. extension of the United States District Court’s oversight of this collective bargaining relationship.”
In addition to Doty’s future, bubbling underneath some of the vitriol hurled between the two sides over who really wants a lockout is the contention in league circles that the strategy favored by the union’s outside counsel is designed to solicit a lockout. From that could flow an antitrust action from players, which could in turn lead to a new round of federal supervision. Such steps could bring sustained involvement for Jeffrey Kessler, who has been the union’s outside counsel for more than two decades.
Kessler dismissed suggestions that he and his firm, Dewey & LeBoeuf, want anything more than what is best for players.
“My job is to help get a fair deal for the players, and I take my orders from DeMaurice Smith and the player executive committee,” Kessler said, referring to the union’s executive director. “Anyone who knows me knows that my sole interest is player welfare. Name calling is not going to help the parties get a deal and avoid a lockout.”
The league’s contentions about Kessler do not mark the first time that outside counsel has been one of focal points in the barbed dispute between the league and the union. The NFLPA has criticized NFL outside counsel Bob Batterman as a “lockout guru,” a reference to his role in advising the NHL ahead of its 2004-05 lockout and the subsequent cancellation of that season. Now, the focus by many within league circles has turned to Kessler.
Kessler is the trustee for what is called “the White class,” the group of players led by Reggie White who in the late 1980s sued the NFL for free agency rights. The CBA emerged out of the settlement in that case, in 1993, with Kessler working as the attorney for White and the other players. It’s unclear exactly what, if any, formal role that gives Kessler with the union, but he has long been an influential adviser involved in almost every special master case and Doty appeal. Kessler also is the outside counsel to the National Basketball Players Association and is considered a top sports labor attorney nationwide for athletes.
Doug Allen, a former top union executive, said Kessler’s White class role did not give him any vote on a new CBA. Kessler did not respond for comment on questions related to his White class role.
A top league source said under no circumstance would the owners sign a new deal with extended federal oversight. However, if union leaders are successful with an antitrust claim, that could force the league’s hand. That same path in 1989 ultimately led to the 1993 deal and the entry of Doty as the main arbitrator of disputes.
The NFL has twice sought to have Doty removed, the last time two years ago, in alleging he is biased in favor of the union. Doty and then an appeals court turned the league down.
The union believes the league negotiated undervalued TV deals in order to secure pledges that the money would be available even without games, though the NFL would have to compensate the broadcasters. The special master sided with the league by allowing the TV agreements, though he did award $6 million to the union for a timing issue in how fees were allocated. If Doty were to overturn the special master’s decision, the league would be unable to tap into the $4 billion the league is set to receive.
The NFLPA has asked Doty to decide by March 3, the last day of the CBA. The union could, however, argue that even absent a CBA, because Doty also oversees the White settlement, which arguably governs antitrust issues between the parties and does not expire with the CBA, his role should continue beyond Thursday.
A half-dozen stock cars sat angled along a stretch of sidewalk last week in the shadow of a Wal-Mart in Ormond Beach, Fla. Dozens of shoppers coming in and out of the store paused to check out the cars and snap photos. Inside the store, an area called “Race Shop” showcased hats, T-shirts and sweatshirts for NASCAR drivers ranging from Kyle Busch to Carl Edwards. And in the food section, a series of 18 2-by-4-foot signs featuring Budweiser and Coca-Cola logos hung from the rafters. They read “Welcome Race Fans.”
Wal-Mart has committed to heavily promoting NASCAR at its retail locations.
In addition to paying a licensing royalty, Wal-Mart has committed to heavily promoting NASCAR at its retail locations. For two weeks this month, it is giving NASCAR industry partners marquee retail exposure in 1,500 stores nationwide. Then, throughout the season, it plans to host fan activities in the parking lots of select stores when races are in town.
That exposure is a game changer in the eyes of NASCAR Team Properties executives who put together the deal. It gives the entire NASCAR industry — teams, tracks and the sanctioning body — an asset to attract potential sponsors at a time when the sponsorship market remains tight.
“Licensing is a big part of it, but from my point of view, having Wal-Mart embrace our sport and having the opportunity to engage with the largest retailer in the world is the biggest upside,” said Joe Mattes, JR Motorsports vice president of marketing and licensing. “It’s a paradigm shift.”
The deal packs a series of firsts: It’s the first major deal between Wal-Mart and a sports property; it’s NASCAR’s first large-scale, direct retail licensing agreement; and it’s the first time in almost a decade that Wal-Mart will promote NASCAR at stores.
But those firsts didn’t come easy. The deal took nearly a year to complete and required everything from driver appearances to NASCAR 101 lessons before it was completed. It nearly was derailed when rumors swirled that Wal-Mart might sponsor Jeff Gordon, and it ultimately required developing promotional and licensing plans before final paperwork was approved.
“We wrestled with it,” said Blake Davidson, NASCAR’s vice president of licensing and consumer products. “But we thought it would be a good opportunity to put the NASCAR brand in front of millions and millions of people. It’s really changing the model.”
Wal-Mart declined to make its executives available for this story.
‘We’re all in’
Just days before the 2010 Daytona 500, Rick Hendrick e-mailed four of NASCAR’s biggest drivers. He asked Gordon, Jimmie Johnson, Dale Earnhardt Jr. and Danica Patrick to travel to Orlando in early March to speak at a Wal-Mart sales meeting.
Though there was obvious overlap between Wal-Mart’s customer base and NASCAR’s fan base, the retail behemoth and motorsports leader hadn’t had a formal relationship since the early 2000s. Hendrick and Marshall Carlson, president and COO of Hendrick Motorsports, hoped exposing Wal-Mart executives to today’s crop of top drivers would change that.
The drivers’ appearance at the Wal-Mart management meeting was a complete surprise. Wal-Mart associates buzzed as Gordon, Johnson, Patrick and Earnhardt talked about teamwork and taking risks on talent. Wal-Mart executives were struck by the associates’ excitement and expressed interest afterward in learning more about opportunities in the sport.
“That was the start of it right there,” said Mattes, who wasn’t in attendance. “That’s when [Hendrick and Carlson] pushed their chips in and said, ‘We’re all in.’”
Hendrick and Carlson enlisted NASCAR’s help to find a solution for Wal-Mart. The sport was in the process of developing NASCAR Team Properties, and that quickly became a vehicle for converting the driver appearance into something sustainable.
Between January and May, parties led by Paul Brooks, NASCAR senior vice president, and John Westling, Wal-Mart executive vice president of merchandise, talked about the type of partnership they could structure. But the licensing trust was still in its infancy and it was unclear what assets it could deliver.
Getting to the source
In an effort to learn more about the sport, Wal-Mart executives attended the 2010 Sprint All-Star Race in Charlotte. Many had never attended a race, and members of the trust took them around the track and provided a course in NASCAR 101.
Mattes took a group of Wal-Mart executives to meet a fan he knew named “Cousin Willy,” who had been attending races at Charlotte Motor Speedway for 30 years. When he introduced Willy to some of the executives from Wal-Mart, a woman from New Jersey who was at Willy’s campsite jumped in.
“I just went to Wal-Mart and spent $120,” she said. “I go before every race.”
A member of the Wal-Mart team asked what she bought, Mattes said, and she ticked off a list that included beer, ice, chips, soda, chicken and more.
“None of that was planned,” Mattes said. “It gave them firsthand what NASCAR Nation was — the passion and the loyalty.”
During a meeting at Hendrick Motor-sports that weekend, it became clear that Wal-Mart wanted to make a deal. Close to a dozen people representing each side threw out ideas about sourcing licensed products and retail promotions. Everyone scribbled notes.
The tone of the meeting was clear, said Mike Brown, director of licensing at Richard Childress Racing. “This was a partnership, not a traditional licensee-licensor relationship,” Brown said. “It gave us ownership of what we were doing.”
As the deal got legs, some members of the licensing trust questioned its value. They worried that a retail program at Wal-Mart would feature only official NASCAR partners and expressed concern that the deal would negatively affect other retailers sponsoring NASCAR teams like Bass Pro Shops, Target and Menards.
A report that Wal-Mart was exploring a partnership with Hendrick Motorsports and Gordon’s No. 24 car threatened to further the divide.
“It created a lot of stir, but teams quickly got over it,” Mattes said.
By last fall, Wal-Mart, which worked with The Marketing Arm’s Charlotte-based Millsport agency, and NASCAR Team Properties had agreed to the framework of a deal. The deal would give Wal-Mart the right to source NASCAR team and driver products and showcase NASCAR at retail. The parties went back and forth over terms of the deal all the way through last week.
Changing the business
NASCAR Team Properties officials believe that the deal has the potential to change the way the sport does business.
Because Wal-Mart plans its retail calendar almost a year in advance, Mattes believes NASCAR teams will have to work on the retailer’s timeline. That means teams will have to approve merchandise designs more quickly and develop paint schemes for the next season earlier.
“We have to grow up and play in the big leagues now,” Mattes said.
Brown believes Wal-Mart’s promotional efforts, like this week’s “Race Time” in Ormond Beach, will deliver added value to existing sponsors and help lure new ones.
The trust didn’t set a minimum investment that a sponsor must make in the sport in order to be showcased in Wal-Mart. It also turned over management of who is showcased and how to the retailer. As a result, competitors like Pepsi and Coca-Cola, and Budweiser and Coors Light will be featured alongside each other.
NASCAR didn’t respond to an inquiry about retailer pass-through rights.
The final benefit that NASCAR Team Properties executives expect to see is an increase in licensed sales and a deeper understanding of what licensed products customers want.
“Are we looking at a [licensing] return?” Brown asked. “Absolutely. But at the end of the day, there’s a lot more to it than selling a T-shirt or a toy. It was really the added value that made this deal worth pursuing.”
One of the most startling sports deals of the year started with a simple phone call just after Thanksgiving.
It ended on Valentine’s Day, after a whirlwind romance that will result in the launch of two new regional sports networks in Los Angeles next year.
The speed and scope of the deal that saw the Lakers sell their local TV rights to Time Warner Cable for 20 years, starting with the 2012-13 season, stunned sports industry executives, most of whom had no clue the two sides even were talking.
Talks were initiated in November by Melinda Witmer, Time Warner Cable’s executive vice president and chief programming officer, who reached out to the Lakers to ask about their local TV rights.
Witmer knew all about the Lakers’ TV rights. Wanting to dive deeper into sports rights, Witmer had hired a consultant to develop a chart that details exactly when all professional sports teams’ local TV deals expire. “It practically jumped off the page to us that the Lakers were up,” she said. “The Lakers are one of the most powerful brands in sports. We never had a pause.”
Witmer knew that her toughest job would be to convince the Lakers that Time Warner Cable was a viable option for them. The cable operator wasn’t really on the team’s radar to acquire local TV rights. Time Warner Cable operated only a local traffic channel and some on-demand channels in Los Angeles. In fact, it was probably best known for selling its local TV rights to the NBA’s Bobcats to Fox Sports Net in 2008.
While Time Warner Cable does not have the same kind of reputation as distributors like Comcast and DirecTV in the programming arena, Witmer argued that it should. It manages 34 local channels across the country — including New York 1 — and could easily launch a new regional sports network in Los Angeles, where it is the dominant cable operator. It already holds stakes in two RSNs: SportsNet NY and SportsTime Ohio.
“There’s been a realization the past couple of years that we’re good at local programming,” Witmer said. “We’ve flown under the radar, but I think we’re a powerhouse in local programming.”
The Lakers’ brass was intrigued and wanted to hear more.
The team’s window with Fox expired at the end of the year, and the two weren’t close. Sources say the Lakers were looking for at least a 15-year deal worth $3 billion, which averages out to $200 million a year. Fox didn’t look like it would go above $100 million a year, which was more than triple the $30 million annual rights fee it pays now.
The first week after the Lakers’ negotiating window with Fox expired, talks began to get serious with Time Warner Cable and encompassed both home and away games. The cable operator’s senior management team, including Time Warner Cable Chairman and CEO Glenn Britt, President and COO Rob Marcus and Witmer, flew from the Consumer Electronics Show in Las Vegas to Los Angeles to talk about the entire package.
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The Lakers’ Jeanie Buss was part of the team of Lakers execs involved in the talks.
“We had a great get-to-know-you meeting,” Harris said. “It wasn’t like, ‘Here’s a proposal.’ It was more like, ‘Here is who we are.’ We talked philosophy and we got to know each other as companies.”
There was an immediate connection, and both sides wanted to move forward. The Lakers were convinced that Time Warner was serious, and Witmer had persuaded them that Time Warner was able to create a high-quality RSN. “They walked in and said, ‘Here is what we know and anything else we will learn,’” Harris said. “We talked nuts and bolts, and we both wanted more Lakers.”
Witmer agreed. She left the meeting convinced that Time Warner Cable could pull off this deal.
“We all hit it off,” Witmer said. “There was a real feeling that we were like-minded on going forward.”
But there also was a real feeling that the two sides needed to act quickly. Time Warner Cable needed as much time as it could get if it was going to move forward and launch a new RSN in Los Angeles. If negotiations stretched too far into the spring, Witmer believed, Time Warner Cable would not have enough time for launch.
They agreed to meet the following week in New York during the NBA’s marketing meetings Jan. 10 and 11. Harris found himself serving as point man on the negotiations, since Buss increasingly was involved in CBA issues as a member of the NBA’s labor committee.
Harris and Desser spent 19 hours over Jan. 11 and 12 at Time Warner Center, where they began to map out the framework of the deal that began to take shape. That was when Witmer floated the idea of creating an additional Spanish-language RSN, to go alongside the English-language one they were discussing already.
“That was all Melinda, and it was an awesome idea,” Harris said. “That really was the clicking point.”
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“The Lakers are one of the most powerful brands in sports,” says TWC’s Witmer.
“It’s something that’s been on our minds for a while,” Witmer said. “We’d be crazy to not recognize the importance of this to our consumers, given our footprint.”
Following the Jan. 10-12 meetings in New York, both sides were assured that the other was serious. The Lakers and Time Warner began hammering out specific details.
A key part of the talks was that Time Warner executives, whose only other NBA RSN deal is in small-market Charlotte, assured the Lakers of their ability to run an RSN with a valuable brand like the Lakers in a marquee market like Los Angeles. The Lakers were still looking to be assured that Time Warner Cable could produce a top-quality and contemporary network befitting the Lakers’ brand. Witmer dismissed concerns about the Bobcats situation, saying that it was only after letting go of the team’s rights that the cable operator began focusing on locally produced programming. “If that were to happen again, I don’t think we would have turned over the Bobcats’ rights,” Witmer said.
By the time the New York meetings ended, both sides knew they were on the path to cut a deal. Harris returned to Los Angeles and the deal progressed with a series of conference calls that moved talks forward. Less than three weeks later, Time Warner executives flew west to Los Angeles to close it.
The two sides started their final set of meetings Feb. 8 at the Lakers’ El Segundo offices. So comfortable were the negotiations that the Lakers insisted on casual dress. As talks dragged into the night, the Lakers stepped up the creature comforts. Buss’ office literally was turned into a spa, the furniture removed and massage therapists put on call. With the team on the road, the Lakers made the practice court available to Time Warner executives for breaks during negotiations. The Lakers gave each member of the Time Warner brass a backpack stuffed with O’Neill surf wear. The team brought a caterer on site.
“The whole point was to make everyone comfortable, and we felt comfortable with each other,” Harris said.
The final marathon session to come to a deal occurred over the next four days. The sides negotiated 12 hours a day — from 9 a.m. to 9 p.m. — in the Lakers’ El Segundo offices, with attorneys present to hammer out the finer points of the deal. Executives in the room said the presence of the attorneys helped speed up the process.
Lakers owner Jerry Buss, who was in Hawaii, was consulted and he fully supported the deal. Neither Lakers nor Time Warner Cable executives would say how much the deal was worth.
When the new Time Warner Cable channels launch next fall, they will become the third and fourth RSNs in the Los Angeles market. FS West will continue to operate with the MLB Angels and NHL Kings. Prime Ticket, also owned by Fox Sports Net, holds the rights to the MLB Dodgers, NBA Clippers and NHL Ducks.
The channels still are so new that they have no name, no launch date and no general manager. The have no distribution deals. But Witmer is determined to build up the channels in Los Angeles.
The likelihood of looking for sports rights in other markets where Time Warner Cable owns cable systems is strong.
“I’ve been a strong advocate of the value of local and regional programming at Time Warner Cable for a long time,” Witmer said. “Local programming is a way for us to connect with our customers.”
As a reformed litigator making the transition to talent agent in 1989, Marc Perman saw something uniquely marketable in a young Charles Barkley. The "Round Mound of Rebound" at the time was an ascending 25-year-old NBA star with the Philadelphia 76ers going through a transition off the court. His relationship with agent Lance Luchnick had collapsed into a cesspool of bad blood, shoddy investments and accompanying lawsuits, so Perman saw an opportunity and contacted Glenn Guthrie, who has been Barkley's business adviser since L'Affaire Luchnick.
Barkley did a Super Bowl ad for Taco Bell (top) and is a familiar face for T-Mobile.
"We're somewhere between 50 and 100, I guess," said Barkley, in his trailer between scenes at a recent T-Mobile ad shoot in Miami, "but really, I am very particular."
Having put Brian Bosworth and Kirk Gibson into TV ads for Right Guard, it was natural that Perman's first deal for Barkley in 1992 was for the same brand. The NBA was in season, so Barkley flew between games by charter jet to Charlottesville, Va., the heart of fox-hunting country, to do the first of a pair of memorable Right Guard spots. It was Barkley's first non-endemic ad, and Perman saw instantly that not only was Barkley a good actor, he was dedicated. "He got off the plane with that script memorized,'' Perman recalled.
The Right Guard ads set the tone for Barkley's later work.
Arguably, the 11-time all-star is a bigger star now than when he was playing. Recent data from the Davie-Brown Index supports that contention, finding that Barkley is known by more than 82 percent of U.S. consumers, about the same number as LeBron James, Ringo Starr, Derek Jeter and John McEnroe. Barkley's trust levels, as measured by the DBI, are on par with Peter Fonda, Jay-Z and Thierry Henry.
As an NBA rookie, Barkley decided not to take any of the easy-money offers to pro athletes for what are often cheesy local ads for car dealers, electronics retailers and burger joints. The Philadelphia-area McDonald's co-op knocked on Barkley's door every year he played for the 76ers (1984-1992). He didn't pitch for McDonald's until it was on a national scale, appearing in various spots, including one of the many follow-up ads for the classic Larry Bird-Michael Jordan showdown, "nothing-but-net" ad.
His success is a result of his candor: Barkley is brutally honest, well-informed and genuinely funny — rare commodities in people and more so in athlete/endorsers. He's Teflon enough and popular to the degree that a guy once fined for spitting on fans, and more recently arrested for DUI when he told police the reason he ran through a stop sign drunk was because of a sexual escapade, can get paid to represent national brands.
True to form, Barkley says too much of him can be, well, just too much. "One thing I get uncomfortable with during the playoffs is when, in every commercial break, they are showing one of my commercials," he said. "Then it just annoys me."
Perman says he routinely rejects one-offs, looking for long-term deals of seven figures. He spurned offers from weight-loss products, despite Barkley's recent shedding of more than 40 pounds. Essentially, it's about finding appropriate creative, like those first Right Guard spots, where he was effectively cast in two "fish-out-of-water" roles, as an equestrian and an archaeologist.
"Those ads weren't about slam-dunking a basketball. They established the self-deprecating face of Charles and were the blueprint for everything we've done since," Perman said. "The campaign is almost more important to us than the product and the compensation, because, like a film career, it leads to the next project. We've been doing it long enough that I can sense if an ad is good from the storyboards."
PRIME CHUCK Charles Barkley, an NBA broadcaster since 2000 following a 16-year career as a player, has the ability to influence brand affinity and consumer purchases, according to the Davie-Brown Index, which measures a celebrity’s attributes. From a national online panel, 1,000 respondents are presented with the name and face of a celebrity and asked if they are aware of the individual. That number is represented here as a percent. Respondents who indicate that they are aware of the celebrity are then asked a standard set of questions about that celebrity, using a six-point scale to record their responses. These questions form the basis for the weighted scores, not percentages, for select attributes measured by the survey.
Athlete (overall DBI rank)
Michael Jordan (22)
Magic Johnson (94)
LeBron James (376)
Charles Barkley (403)
Larry Bird (413)
Notes: Awareness indicates the percentage of consumers who are aware of the celebrity either by name or by face. “Trust” indicates the level of trust that the consumers place in the celebrity’s words and image. “Endorsement” reflects the degree to which consumers identify the celebrity as being an effective product spokesman.
Any commercial spokesman with Barkley's staying power is an anomaly. He has been with Nike since his rookie year 27 years ago. The best explanation for his endurance is the most obvious one — his outspokenness. "He's candid to a fault, and that's not necessarily something you see in a lot of athlete endorsers," said Mark Zablow, senior director of marketing at Platinum Rye Entertainment, who matches personalities and brands for clients that include P&G. "As a result, he's underleveraged, when you consider how recognizable he is."
Or as former Turner Entertainment President Mark Lazarus said countless times when describing Barkley's success as an on-air talent: "He knows how to straddle the line without crossing it."
Doug Shabelman, president of talent broker Burns Entertainment & Sports Marketing, said: "Barkley clearly relishes being front and center, and he's still relevant to a wide range of ages. You can't say that about many athletes, retired or otherwise, and that's why he has lasted so many years."
Perhaps the most fascinating thing about Barkley's success as a pitchman is hearing his rationale for doing them. It's the same reason he is attracted to politics — there is a deep-seated need to connect and communicate.
"I don't do commercials just for money, 'cause I don't need the money," he says with a shrug. "I do them because it keeps me relevant, so then I get to talk about stuff that I really want to. You just can't show up and be significant. The one thing that TV commercials do is they keep you out there."
Would you rather have more money or more TV viewers?
That was the choice the BCS faced in 2008 when it considered moving the national championship game — one of the crown jewels of American sport — from broadcast to cable.
The choice for ACC Commissioner John Swofford, the BCS coordinator at the time, and the other conference commissioners wound up being an easy one. They took the money.
At the time, ESPN told IMG's Barry Frank, who negotiated the deal for the BCS, that it would pay $495 million over four years to bring the national championship and other BCS games over to cable. That bid was $100 million higher than Fox's and was too big of a difference for the BCS to pass up.
Conference commissioners couldn't resist ESPN's offer for BCS rights, even after predicting a 10 percent drop in viewership.
There's been a clear trend over the past decade of sports migrating to cable channels. Cable is home to MLB and NBA playoff series. Versus has carried two Stanley Cup Final games per year since 2006. The only place you could see NASCAR's Chase for the Sprint Cup last year was on ESPN.
But those deals come at a cost. Network and league executives say that cable channels still have to pay a healthy premium if they want to pick up the rights to bigger sports events. Leagues have not yet placed as much value on the broadband services and added shoulder programming that come with cable networks, as they do on the broadcast universe of 114 million homes.
Television viewership trends on broadcast and cable networks
NFL prime-time average viewership*
MLB league championship series average viewership
NASCAR Chase for the Sprint Cup average viewership
BCS average viewership
Stanley Cup Final average viewership
* Does to include NFL Network's partial-seasonschedule.
Source: The Nielsen Co.
The Auburn-Oregon national championship in January drew 27.316 million viewers, an 11 percent drop from last year's Alabama-Texas game, which drew 30.776 million viewers to ABC. That number is good enough to place fourth out of the last 12 BCS national championship games and was the most-watched cable program of all time. Overall, for all of the BCS games, the first year of the series on ESPN dropped an average of 2.549 million viewers from 2010 (down 13 percent), when the games were shown on Fox and ABC.
"It's what we expected when we made the decision to go in that direction," Swofford said. "It took some thorough and lengthy discussions about the wisdom of doing it or not. The financials pushed it in that direction, but we would not have taken that step unless we felt the vast majority of sports fans could have access to it if they really wanted it."
A premium on viewers
It's undeniable that cable brings a smaller audience than broadcast networks — most put the sports viewing differential at 10 percent between broadcast and cable. The biggest cable channels, such as ESPN, TNT and TBS, are in 100 million homes, compared with broadcast's reach of 114 million homes. By almost any comparable measure, the sports TV audience on broadcast is bigger, which is why cable channels still have to pay a premium over broadcast for the same content.
NBC's "Sunday Night Football" has averaged more viewers than ESPN's "Monday Night Football" every year since those packages were split in 2006 (see chart, Page 18). Fox averages more viewers than TBS during MLB's league championship series. The Stanley Cup audience on Versus is a fraction of what NBC delivers. And NASCAR ratings dropped significantly last year for races that moved from ABC to ESPN.
The quiet competition between broadcast networks and their cable counterparts is one of the most debated components in sports media. Broadcast networks believe ESPN and Turner don't get the scrutiny they should, and they have spent years complaining about ESPN's dual revenue stream of cable affiliate fees and ad sales, which allows cable channels to pay more for rights. But many rights holders and sports media consultants insist that cable channels will continue to have to pay a premium to bring bigger sports events onto cable television.
"Broadcast TV has a rating premium, a prestige premium, and a production premium in the minds of many rights-holders," said Frank, IMG's executive vice president of media sports programming. "That broadcast premium is shrinking, but it's shrinking very slowly."
While this competition is well-known in media circles, the NFL offers a perfect and public example of this kind of premium. ESPN pays an average of $1.1 billion per year for "Monday Night Football." That's around 82 percent higher than the $603 million annual average NBC pays for "Sunday Night Football."
Yet there are elements of NBC's deal that you would expect would go to the channel paying a bigger rights fee. The broadcast network has rights to one wild-card playoff game; ESPN doesn't. NBC is in the rotation to broadcast the Super Bowl every three years; ESPN isn't. Plus, NBC typically gets a better package of games for its prime-time Sunday night schedule than ESPN.
NBC PHOTO / ZADE ROSENTHAL
NBC pays substantially less for "Sunday Night Football" than ESPN pays for "Monday Night Football," and gets many more benefits in its deal.
"We are focused on providing broad distribution for NFL games," an NFL spokesman said. "Given our large fan base, broadcast television has been an outstanding partner and has helped us telecast NFL games to the widest possible audience."
Despite the cable premium, cable channels increasingly have been enticing sports events with a bigger checkbook and more services. Cable channels generally have more expansive digital and mobile services than broadcast networks, which allows them to reach more fans who are not in front of their televisions. The bigger leagues view those added services as nice to have, but they still want to be paid for TV numbers.
"You'd like to think in this day and age that relationships matter," said Fox Sports Co-President Eric Shanks. "But in the end, the check always rules."
Turner is about to start telecasting NCAA tournament games, to go along with one MLB league championship series per year, and the NBA playoffs. ESPN just finished its first season with the BCS, to go along with NASCAR's Chase, the British Open and the NBA playoffs.
"There are three properties on broadcast that probably will stay on broadcast for the near term — call it three or four years," said John Skipper, ESPN's executive vice president of content, referring to the NFL playoffs, World Series and NBA Finals. "Only the NFL has made much of a public deal out of saying that they continue to believe that their championship has to be on free, over-the-air television."
Skipper said rights holders often start negotiations by telling him that they want a broadcast window, which in ESPN's case means ABC. But, he adds, broadcast demands rarely present a significant hurdle in negotiations.
"It comes up because people have a reflexive reaction to ask about network. In almost no discussions is it a significant problem anymore," Skipper said. "We're pretty clear with people that in most of our negotiations, we're talking with them about ESPN. I have yet to be thrown out of the room."
The drop in the number of viewers for the BCS national championship game bolstered broadcaster complaints that cable networks don't grow a property's audience and won't attract casual fans.
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Sports rights give channels leverage when negotiating carriage fees with cable systems.
ESPN executives say the overall TV numbers don't tell the whole story.
Cable networks skew younger, they say, which is important to advertisers who help support the programming. This year's BCS championship, for example, actually saw a jump in the male 18- to 34-year-old demographic from last year. That's the demo that advertisers covet.
ESPN executives also are quick to point out that half of the 2.9 million broadcast-only viewers who tuned in to the 2010 BCS championship game on ABC watched only 11 minutes of the game.
"These are casual bystanders," said Artie Bulgrin, ESPN's senior vice president of research and analytics. "That's not what's driving the audience."
ESPN and BCS executives say it's foolish to focus only on TV numbers for the game's three-hour commitment. Throughout the season, ESPN ran BCS-related programming, building up to the championship. Swofford said the BCS was attracted to ESPN's commitment to run BCS programming all season across its networks and websites.
"There's a feeling if cable is the entity that can give the best all-around coverage leading into the game, after the game and the event itself, then it's probably the way to go," Swofford said.
Turnkey Sports Poll
The following are results of the Turnkey Sports Poll taken in January. The survey covered more than 1,100 senior-level sports industry executives spanning professional and college sports.
» If you were a sports property reviewing options for your next rights deal, what would you choose?
Lower rights fee from a
broadcast network, but
access to more households
Higher rights fee from a cable
network, but access to fewer
Not sure / No response
» Which of the following cable sports TV networks is most poised for a breakout year?
Big Ten Network
Fox Soccer Channel
Not sure / No response
» On which of the following devices have you ever watched a live sporting event? (Please select all that apply)
Tablet computer (iPad, etc.)
None of these
Source: Turnkey Sports & Entertainment in conjunction with SportsBusiness Journal. Turnkey Intelligence specializes in research, measurement and lead generation for brands and properties. Visit www.turnkeyse.com.
Skipper pointed to ESPN studio shows, such as "College GameDay" and "College Football Live," as well as its live game windows on ABC, ESPN, ESPN2, ESPNU and ESPN3 as evidence that ESPN covers college football more thoroughly than other media outlets.
"I think it was a fairly beautiful thing that from the first week of the season with the kickoff weekend down in Atlanta, to the championship in Phoenix, the place where you found the most continuity in college football was ESPN," Skipper said. "We think ESPN is the right place to put the BCS championship."
Swofford agrees, but he said he picked up the most validation last year when the NCAA tournament cut a deal to put the Final Four and championship game on Turner starting in 2016.
"We were taking a step particularly in terms of mainstream sports and the ultimate championship game that had not been taken," Swofford said. "We certainly were in the early phase of it."
The NCAA tournament
Turner felt the same cable premium as it negotiated a 14-year, $10.8 billion deal to share the NCAA tournament with CBS. Because Turner can increase its affiliate fee across three networks (TNT, TBS and truTV), it is paying a bigger share of the rights fee, industry sources said. CBS also capped the amount of losses it could incur.
But in exchange, Turner's president of sales, distribution and sports, David Levy, made sure that Turner would have a package that was equal to CBS's. "I made it clear from our very first meeting that I was not interested in any sort of smaller cable package," Levy said. "We are sharing this."
CBS, which couldn't afford to keep the tournament on its own, agreed to the deal, which will see Turner carry the Final Four and championship game every other year, starting in 2016.
"It was a question of economics," said Sean McManus, chairman of CBS Sports. "The amount of money that both we and Turner are paying for the television rights necessitated that we both got rights to the Final Four in certain years. We wouldn't have paid the kind of money we are paying, and Turner wouldn't have paid the kind of money they are paying, without the opportunity to showcase the Final Four and the championship game."
The advantage Turner brings is that it has the outlets to show all of the tournament's games — an upgrade from CBS's regionalized coverage over the past couple of years.
"Cable has always been a great opportunity to grow the overall revenue pool in sports," Levy said. "Cable gives all sports leagues the opportunity to run on different nights."
That sort of flexibility convinced MLB to sell alternating league championship series to Turner.
"Our cable partner has more flexibility because they have more outlets than a single broadcast station," said Tim Brosnan, MLB's executive vice president of business. "That's the benefit of the big cable guys. They have scheduling flexibility that they can loan to you by virtue of usually having more than one outlet available to them. Because of the way they program, they are a little less intense about prime time in the fourth quarter."
Last month, when Comcast's NBC acquisition finally closed, NBC Sports Chairman Dick Ebersol sent an internal memo to his new employees that underscored why so many cable outlets are looking to acquire sports packages.
Ebersol's memo, which was obtained by SportsBusiness Journal, talked about the combination of broadcast and cable sports assets. But Ebersol gave a special shout-out to something he hasn't had at NBC: "sub fees that we broadcast dinosaurs have coveted for so long."
Those "sub fees" — the money distributors pay to carry cable channels — enable cable networks to afford sports rights better than broadcast networks, which mainly are dependent on only advertising revenue. It's why so many competitors for sports rights live in the cable world, like ESPN, Turner and Versus, with others, like FX, looking for opportunities. Those channels know that cable and satellite operators pay more for channels that offer sports than they do for channels that are focused on news or entertainment.
Versus has carried two Stanley Cup Final games per year since 2006.
ESPN makes more than $4 a subscriber a month. With 100 million pay-TV homes, that equals $4.8 billion a year, even before ad sales are factored in. Thanks largely to the NBA and MLB playoffs, TNT pulls in around $1 a subscriber a month. With the NCAA tournament spread across three Turner channels, Levy expects to get healthy increases from distributors that can't afford to lose NCAA tournament games in March.
But broadcasters are starting to make changes. Fox, in particular, has convinced distributors to pay cash for retransmission consent rights. Fox believes that the additional source of revenue will help it better compete with cable networks for sports rights.
"We look at the broadcast business as a business that should have and will have two revenue streams and should be able to compete on any level with any rights negotiation over time," said Fox Sports Co-President Randy Freer. "It doesn't happen overnight. But we certainly believe that it's a model that can be converted to a dual-revenue-stream model."
Taking care of the distributors who pay that revenue stream is one reason why Skipper wants to move so many sports over to ESPN.
"Our job is to serve fans," he said. "Our job as a division of Walt Disney Co. is to return the greatest profits to our shareholders. Clearly, we're making decisions to put content on ESPN because we believe it will drive value to our distributors. They pay us a significant amount of money, and we have an obligation to drive value to them. That ultimately drives our profits and helps pay the shareholders of Walt Disney Co. That's the enterprise we're engaged in here."
Staff writer Michael Smith contributed to this report.
Applications allow Toronto, Vancouver fans to watch in-market games on mobile devices.
The Vancouver Canucks and Toronto Maple Leafs have partnered with technology firm NeuLion to create a smartphone application that allows fans in both cities to watch live in-market games on their handheld devices.
NHL clubs negotiate the use of in-market digital rights with their respective regional sports networks, and most U.S.-based teams have given those rights to their RSNs. The Canucks and Maple Leafs, on the other hand, both of whom have local broadcasting deals with Rogers Sportsnet, kept their respective rights for digital and mobile streaming.
“They kept the digital rights rather than sell them in the negotiations with the RSN,” said John Collins, COO of the NHL. “They have been two of the more aggressive clubs in innovation and driving technology to improve the fan experience.”
Rogers Sportsnet declined to comment for this story.
The Canucks launched the mobile application, called Canucks Live, on Dec. 17 and promoted the service — which costs $9.99 for the remainder of the regular season — across the team’s free Canucks Mobile application. According to team COO Victor de Bonis, the club has sold approximately 10,000 subscriptions.
“We had a vision of what we wanted to do in the market with [digital rights] when we negotiated with [Rogers Sportsnet],” de Bonis said. He added that the application will return next season and that the team’s goal is to convince 10 percent of the approximately 200,000 subscribers to the team’s free application, which offers live stats and video highlights, to purchase the mobile streaming plan.
The Maple Leafs launched the $19.99 Leafs TV Interactive Mobile during the first week of January, and promoted the service on the team’s website and social media pages. The application is available only to iPhone and iPad users. Chris Hebb, Maple Leafs senior vice president of broadcast and content, declined to say how many sales the team had made, saying the application is in beta testing and the club will re-evaluate its price point, functionality and overall performance at the end of the season.
“We want to learn whether we are just creating frustration in the marketplace or if we are really benefiting our customer,” Hebb said. “We want to see what the response is before we really market the product.”
Both applications are based off of the NHL’s GameCenter Live mobile player, which was designed by NeuLion. In addition to the live game broadcast, which is produced by Rogers in Vancouver and the Maple Leafs’ own production company in Toronto, the application includes condensed games, highlights and a stats package. Both applications feature advertising from the regular telecast. According to Chris Wagner, executive vice president of strategy at NeuLion, the applications rely on a phone’s GPS positioning to prohibit the application from functioning out of market.
The move comes several months after the league said it was close to an agreement with Fox Sports Net and Comcast SportsNet that would allow many of its 24 U.S.-based teams to stream live in-market games. U.S.-based RSNs frequently demand that digital rights be included in their contracts, but they rarely stream games on the Internet or to mobile devices. A source close to the story said the league’s negotiations with FSN, which holds the rights to 13 teams, and Comcast SportsNet, which holds the rights to four, are still ongoing.
Currently, the New York Yankees and San Diego Padres allow fans to stream live games through a paid subscription service, as do the Portland Trail Blazers. In 2010, Comcast SportsNet streamed live Chicago Bulls and Philadelphia 76ers games, but the network did not bring either service back due to disappointing demand and economic issues.
“We remain open to streaming, but new [streaming] agreements need to make economic sense to us and provide good content for our viewers,” said a Comcast spokesperson.
FSN officials declined comment.
Not all Canadian teams have binding digital agreements with RSNs, however. The Ottawa Senators negotiated digital rights but retained the team’s mobile rights and, according to team sources, will work with Rogers Sportsnet to roll out a broadband streaming service for the 2011-12 season. The team is still researching a plan for mobile streaming.
The Edmonton Oilers said Rogers Sportsnet will determine whether the team streams live content. The Montreal Canadiens and Calgary Flames did not return calls for comment.
“Our focus has been on creating a seamless environment for the fan to view as much NHL content as they can,” the NHL’s Collins said, “while still respecting the flow of rights.”