SBJ/June 11-17, 2012/Media

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  • MLB extends deliberations as MASN, Nationals said to be $70M apart on new rights deal

    MASN and the Washington Nationals still are so far apart in their media rights fee dispute — there’s a $70 million annual difference between the two sides, sources say — that Major League Baseball has decided to extend its deliberations by a month.

    Originally, the league planned to decide how much MASN should pay the Nationals for their media rights by the beginning of June. Now, MLB has told both sides not to expect a decision until July, sources said.

    It’s not clear why MLB has held off on making a ruling, especially since the league originally heard testimony in April. But sources say the league has a concern that any decision will lead to a lawsuit from one side or the other.

    Plus, other MLB teams are watching the dispute closely, fearful that a ruling in favor of MASN could set a new lower bar for local TV rights. In the past few years, the market for local baseball rights has been scalding hot, punctuated by deals like the Texas Rangers’ 20-year, $3 billion pact with Fox Sports Net and the San Diego Padres’ 20-year $1.2 billion deal, also with FSN.

    Right now, the two sides are far apart, and there doesn’t appear to be much middle ground.

    The Nationals have told MLB that they should receive an average of more than $100 million a year in media rights, a fee that would put the team on par with other teams in the top-10 media markets.

    MASN said the fee should average about $35 million a year, citing the team’s low TV ratings and tepid fan base. Plus, MASN believes the fact that Baltimore Orioles games are carried in the Washington, D.C., market should depress the rights fee going to the Nationals. MASN’s offer represents a 20 percent increase over the $29 million a year it now pays the Nationals.

    In addition to the rights fee, the Nationals hold a 13 percent equity stake in the regional sports network, adding 1 percentage point annually until it peaks at 33 percent.

    Complicating matters is a parity clause in MASN’s contract requiring that the Orioles receive exactly as much in rights fees as the Nationals. That means if the Nationals wind up with a new deal worth $100 million a year, the Orioles also would get $100 million a year.

    Cable industry sources have questioned whether MASN could afford both contracts, given the long-term carriage deals they already have signed with cable and satellite operators. MASN gets about $2.14 a subscriber per month, according to figures from SNL Kagan. That’s higher than only a handful of RSNs.

    Plus, MASN has run into trouble expanding its footprint in North Carolina, where Time Warner Cable has refused to give it basic tier carriage. Just last month, a federal appeals court upheld a Federal Communications Commission decision that allowed Time Warner Cable to keep MASN off of its basic tier, according to published reports.

    MLB created an ad hoc committee of owners from the New York Mets, Pittsburgh Pirates and Tampa Bay Rays to come to a decision. Rob Manfred, MLB executive vice president for labor relations and human resources, is leading the committee.

    As part of their MASN deal, the Nationals can reopen their media rights deal every five years. The two sides have been negotiating since the end of last season. As part of the contract, if the two sides can’t reach an agreement, MLB would settle the matter via an arbitration-like process.

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  • NASCAR: No panic over dip in 18-34 demo

    NASCAR’s struggle to attract and maintain young male viewers for Sprint Cup Series broadcasts resurfaced during the first half of the season.

    Ratings in the male 18- to 34-year-old demographic dipped 20 percent on Fox this season through the first 13 races of the season, virtually erasing a 20 percent gain the sport made in the area last year. The average Nielsen rating in that demographic fell to a 1.4 from a 1.8 in 2011.

    But the loss of the young male viewer is not producing the same angst this year with Fox and NASCAR executives as it did in 2010, when ratings in that demographic dipped by 29 percent.

    Weather-affected races and competition from other sports caused NASCAR to give up gains it made last year among young men.
    Photo by: GETTY IMAGES
    “Two years ago, I looked at the men 18-to-34 trend, and I personally felt like it was a crisis. It represented a real threat to the ongoing health of the sport,” said Mike Mulvihill, Fox Sports’ senior vice president of programming and research. “I think the 18-to-34 problem we had this year was mostly driven by competitive scenarios, which change every year. I don’t feel like it was reflective of a long-term problem with NASCAR itself.”

    Young men came back last year, when stories like Trevor Bayne becoming the youngest Daytona 500 winner garnered national attention, and the demographic registered a 1.8 rating, up 20 percent from 2010. Last year, Fox also had the benefit of starting its NASCAR coverage after being able to promote the sport when the nation’s single-largest TV audience tuned in for its broadcast of Super Bowl XLV. But this year, a combination of weather-affected races and competition from other sports properties caused NASCAR to give up those gains.

    “We’re dealing with a fickle demographic there,” said Steve Herbst, NASCAR’s vice president of broadcast and production. “We had a big jump up last year when we had some terrific story lines. This year, we know we still deliver a terrific number compared to other sports in the male demo, but it’s a constant fight in the fragmented content world to capture that audience.”

    Overall, Fox saw a 4 percent decline in ratings and 8 percent decline in viewership for its schedule. The network averaged a 4.8 Nielsen rating and 7.9 million viewers for 13 Sprint Cup telecasts this season.

    Turner will broadcast the first of its six races on Sunday, and ESPN and ABC have the final 17 of the season.

    Weather affected the sport at the start of the season. The Daytona 500, NASCAR’s biggest and most highly rated race, was postponed until Monday night and beset by a long track delay after Juan Pablo Montoya’s car collided with a jet dryer. Ratings for the race decreased 8 percent from a year earlier.

    NASCAR’s next two races were affected by strong competition. Ratings for its Phoenix race March 4, which went head to head with a New York Knicks game at the height of national interest in Jeremy Lin, declined 5 percent to a 5.6 rating, and ratings for its Las Vegas race, which went head to head in NASCAR-friendly markets like North Carolina and Ohio with ACC and Big Ten basketball championship games, declined 12 percent to a 5.2 rating. NASCAR historically had a bye weekend when NCAA conference basketball tournaments took place but that bye was eliminated this year when the Daytona 500 was pushed back by a week.

    The race at California’s Auto Club Speedway, also early in the season, was off 17 percent after rain shortened the race by 71 laps.

    Ratings stabilized in April and since then the average rating has been flat with 2011 at 4.0. The Kansas race April 22 delivered the sport’s only ratings increase of the season, posting a 4.3 rating, up from a 3.9 a year ago. Still, Fox executives said they were happy with a performance that would place its NASCAR telecasts as a top-20 show in the men 25-54 demo.

    “The most important stories for us are the 18-to-49 story and the 25-to-54 one,” Mulvihill said. “Those stories are healthy in how they compare to prime time and other sports in the first and second quarter. Looking at 18-to-34 as a subset of the demos that are most important to us, we wish that it was trending the other way. But I still think that the possibility for us to get back in a positive direction next year is there.”

    NASCAR’s overall ratings decline and decrease in young male viewership comes as the sanctioning body prepares to go to market with its TV rights. The sport’s $4.48 billion, eight-year agreements with Fox, ESPN and Turner run through 2014, and NASCAR has started preliminary negotiations for new broadcast deals this year. Incumbents ESPN, Fox and Turner expect to bid on new packages; and NBC is believed to be ready to bid on a package, as well.

    NASCAR is in the process of rolling out a five-year plan designed to address several areas of its business, including waning interest among young men. The plan begins in full force in 2013, and NASCAR Chief Marketing Officer Steve Phelps said the sport’s television partners have been shown the plan and are supportive of the sanctioning body’s move to address recent declines among young men.

    “That’s important for us,” Phelps said. “If we’re having this discussion in five years and we haven’t grown that 18 to 34, we’ll have another management change.”

    Though the sport’s signature Sprint Cup Series has seen declines in viewership among that demographic, its secondary series, the Nationwide Series, has seen increases. ESPN, which televises the Nationwide Series along with ABC, saw a 25 percent increase among young male viewers over the first 11 races of the season. Overall, viewership was up for nine of 11 races, delivering an average 2.4 million viewers and a 1.7 Nielsen rating, a 7 percent and 6 percent increase from last year, respectively.

    “The 18-to-34 demo … has responded positively to the pick-a-series change we implemented last year,” Herbst said, referring to NASCAR’s new rule stipulating that drivers can only compete for a championship in one of the sport’s three series. “New stars in the [Nationwide Series] have created great story lines and those have positively impacted [the series’] ratings.”

    SportsBusiness Daily Assistant Editor Austin Karp contributed to this report.

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  • Study: U.S. fans slow to use connected TV

    Adoption of Internet-connected TV remains slow, despite significant interest in the technology by many properties, networks and manufacturers, according to a new study of the overall U.S. sports market by digital sports outlet Perform.

    The study, commissioned by Perform and developed with the aid of European sports and entertainment outlets KantarSport and TV Sports Markets, found that only 5 percent of American consumers use Internet-connected TVs to consume sports content.

    Yet, fans polled still believe the emerging technology will have the single greatest impact of any technological advance upon overall sports consumption in the next two years.

    “We were, frankly, surprised at the [current consumption] number. We thought going in it would be at least 10 percent or so,” said Juan Delgado, Perform Americas managing director. “What this means is that there still is a bit of a way to go in terms of making content easy to access through the Internet-connected sets. It’s still a bit of a hurdle.

    “But when you look at what’s now happening for sports on YouTube, on Facebook, what many of the leagues are doing, there’s clearly a lot of upside. It’s just a matter of bridging that access gap and making people realize that streaming content doesn’t have to be viewed on a tablet or laptop or phone but can be seen on a big, beautiful flat screen.”

    The study, being distributed to Perform’s clients and business partners, is in part a branding effort for the U.K.-based operation. The company’s U.S. partners include Silver Chalice New Media, a wide range of domestic newspapers including the Los Angeles Times, and Sporting News, an affiliated publication of SportsBusiness Journal.

    Of the more than two dozen countries where Perform operates, the U.S. provides its single largest slice of revenue, but Perform is still seeking further American traction.

    “It’s certainly in part a branding play. But it’s also about trying to better understand what is a very large and important territory,” Delgado said.

    Among the other findings in the study: The average U.S. sports fan spends about eight hours a week on average consuming sports, higher than many other countries. Just 4 percent of users polled have watched sports on 3-D TV, lending further support to other claims of weak consumer support for the technology.

    And predictably, use of mobile and social platforms to consume sports content has surged, with 34 percent of users polled saying they use mobile platforms for sports, and 26 percent using social networking platforms. Both figures are up by more than 10 percentage points from how those same users said they followed sports during 2011.

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  • Will distributors make an example of a sports channel this fall?

    John Ourand
    The most important sports media story of the year will occur this fall when as many as six high-priced sports channels will be looking to gain cable and satellite carriage in various U.S. markets: college channels like Longhorn Network and the Pac-12 Network, plus regional sports networks in Houston (Comcast), Los Angeles (Time Warner), New Orleans and San Diego (both Fox).

    The question of whether these channels are successful will be a big indicator for the future market of sports rights.

    If we use the past five years as a gauge, it’s likely that most of these networks will find significant carriage after public — and sometimes bruising — battles. Most of these channels already have some carriage deals in place.

    Longhorn Network is among as many as six sports channels that will be looking for carriage deals in big markets this fall.
    Photo by: GETTY IMAGES
    But I sense that distributors are prepared to fight this fall as a way to try to keep their own sports rights in control. Already, Longhorn Network and Fox Sports San Diego are having trouble getting full carriage. Others are certain to have fights, too.

    In private conversations at a cable industry convention in Boston last month, cable operators complained about the cost of sports channels — as they always do. But rather than complain about established channels like ESPN, Fox Sports or NBC, they mainly pointed the finger at these new channels looking to launch.

    Their main complaint is that they feel they are being asked to pay twice for the same programming. They complain that the University of Texas and ESPN, for example, have sliced up programming packages too much. In past years, distributors paid for channels that carried all of Texas’ football games. Now, they are being asked to pay more — about 40 cents a subscriber per month — for another channel that has two Texas football games. If they don’t pay, they don’t get the channel.

    So far, the channel, which is owned by ESPN, has not had any traction. A source said that ESPN and Time Warner Cable have not even discussed the network in months. And DirecTV Chairman, President and CEO Michael White told an investor conference earlier this month, “We have not put the Longhorn Network on, and have no plans to.”

    It’s not just Longhorn Network that is causing this ire. Take Los Angeles, for example. By the end of the year, Los Angeles will have five regional sports networks — more RSNs than any other market in the country. In addition to the two that already exist from Fox, Time Warner Cable is planning to launch two for the Lakers and the Pac-12 is planning to launch one around UCLA and USC.

    For cable or satellite operators in Los Angeles that means that the cost for local sports will just about double this year. This fall, it would cost about $10 a subscriber per month to carry all of those networks. According to SNL Kagan, the two Fox RSNs (Prime Ticket and FS West) now cost a little more than $5.

    In the past several years, the blueprint for rights holders has been to cut ownership deals with distributors as a way to guarantee carriage and success. That’s what the Lakers have done with Time Warner Cable. The Pac-12 announced significant cable carriage deals. And Fox has deals with Cox in New Orleans and San Diego.

    But that strategy is not foolproof, and some distributors are fighting back.

    Perhaps the biggest concern for programmers and rights holders may be recent public comments from the head of DirecTV, the satellite company that has become known for cutting sports deals early. Speaking at that investor conference, White made it sound like he was prepared to fight carriage battles this fall to keep his programming costs down.

    Specifically, he said he didn’t know what DirecTV would do with Time Warner’s planned channels. He said DirecTV has question marks about the Pac-12 channels, though he added, “We’re not going to have seven [Pac-12] channels, I can assure you that.”

    My guess is that most of these channels will be successful eventually. But distributors have grown weary of paying huge increases on these channels and are looking to claim at least one scalp. The question is if that scalp gets claimed this fall.

    John Ourand can be reached at jourand@sportsbusinessjournal.com. Follow him on Twitter @Ourand_SBJ.

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