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SBJ/July 18-22, 2011/Franchises
New deal to give Celtics stake in RSN
Published July 18, 2011, Page 1
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Multiple sources said that the Celtics and Comcast are close to a long-term media rights deal despite the NBA lockout that has thrown the league into economic uncertainty.
The pact would continue the trend of big market teams securing significant increases in media rights fees that double or triple the payout from existing deals. The deal is also another example of professional sports teams making deeper inroads into the media ownership business.
The NBA lockout, now in its third week, has not slowed progress of the expected agreement so far, though it could cause the league to hold off on a formal announcement until a labor deal is reached.
Once the Celtics and CSN agree to the deal, it will move to the NBA for formal approval. As it has in past local media deals, the NBA most likely will demand a “re-set” after the deal’s first 10 years.
The proposed deal, which could be finalized in the next few weeks, would extend the Celtics’ media deal to 2038 from the current agreement that runs through 2017. In addition, the team would take up to a 20 percent equity stake in the regional sports network and receive a healthy increase in its annual rights fee. The Celtics currently get between $15 million and $20 million annually, which is considered below market for such a strong franchise.
Neither Comcast SportsNet nor the Celtics would comment for this story.
Comcast SportsNet President Jon Litner is the architect of the deal, which will give the Celtics a sizable signing bonus and steep increases in the first few years of the deal, though specific terms are not yet known. The rights fees increases will level off throughout the length of the agreement.
The Celtics and Comcast SportsNet have been partners since Comcast bought the RSN from Cablevision in 2007. Celtics games have been part of the RSN’s lineup since 1981, when it launched as Prism New England. The Celtics clearly provide the most valuable programming on the RSN, which competes in the Boston market with NESN, an RSN owned in part by the Red Sox and Bruins.
The two sides first started talking about a long-term deal a year ago. Sources said that talks heated up just before the Los Angeles Lakers blockbuster 25-year RSN deal with Time Warner Cable was announced in February. That deal averages $200 million per year. Serious negotiations between the Celtics and Comcast then ensued this spring under the shadow of the league’s labor uncertainty.
The Celtics’ new RSN deal follows Comcast’s strategy of giving equity stakes in its RSNs to local teams. Comcast pursues this strategy as a way to stay in the profitable RSN business while keeping teams from launching their own channels. The Houston Astros and Rockets own a combined 80 percent of CSN Houston, while the San Francisco Giants hold a 30 percent stake in CSN Bay Area. In Chicago, the White Sox, Cubs, Bulls and Blackhawks hold a combined 70 percent stake of CSN Chicago.
The expected Celtics-CSN New England deal comes as the NBA works to overhaul its revenue-sharing system, an effort led by Celtics owner Wyc Grousbeck, chairman of the NBA’s planning committee.
NBA Commissioner David Stern said recently he expects the league to triple the amount of revenue sharing among NBA teams and depending on the structure of the new revenue-sharing system, the Celtics could end up sharing proceeds of their increased rights fees from a new local television deal with other NBA clubs.
The Celtics this past season on CSN New England generated the fifth highest RSN ratings in the NBA. Its 4.73 average rating is up 53 percent from the 2009-2010 season. The 116,000 homes that tuned in to each game was the league’s fourth highest.
The Celtics hired Evolution Media Capital to advise them on this deal.