SBJ/Aug. 26-Sept. 1, 2013/Media

ESPN, Turner in talks to exit NASCAR early

ESPN and Turner Sports are talking with NASCAR about getting out of their broadcast rights agreement a year early, a move that could allow Fox Sports and NBC Sports Group to become the sport’s broadcasters next year.

It’s unlikely that the four TV companies will be able to reach a deal, sources say. But the fact that these types of talks are occurring is precedent-setting in an industry where live sports rights are held sacred. For at least the past decade, no rights holder has exited a major media agreement with a property early.

ESPN and Turner executives told the series that they are interested in forgoing the final year of their contract. Fox and NBC executives told NASCAR that they are interested in picking up those rights. And sources say NASCAR executives are open to the switch.

But any deal faces significant hurdles. Sources said it would have to be a complete switch, not a partial one in which Turner exits its six Sprint Cup races or ESPN exits part of its Nationwide Series season. That means it would require an agreement between four competitors — ESPN, Turner, Fox and NBC — and one property, which would be difficult to structure.

ESPN and Turner Sports are willing to sell their rights back to NASCAR for some sort of compensation. Fox Sports and NBC Sports Group are willing to buy the rights from NASCAR, but they feel they should be compensated for letting ESPN and Turner Sports out of their deals early. As the middleman, NASCAR would have to navigate those opposing interests.

Representatives from the four media companies, as well as NASCAR, declined comment.

Such talks are exceedingly rare in sports media. Television companies that lose rights to a sport a year before their contract ends typically choose to ride out the final year of their agreement as a lame-duck rights holder. For example, Fox broadcast the BCS in 2009 and 2010 after ESPN outbid it for the rights in 2008. And ESPN is carrying the FIFA World Cup from Brazil next year, even though Fox outbid it for rights for 2018 and 2022. Later this week, CBS will broadcast the U.S. Open before the rights head over to ESPN in 2015.

NASCAR’s situation is a little different in that it will be dealing with two lame-duck partners that almost certainly will cut corners in promotion and production next season.

ESPN and Turner Sports have told NASCAR they are prepared to carry the races next year, but both would prefer avoiding that lame-duck status. Both opted not to submit final bids to retain NASCAR rights when the sport held TV negotiations last month, and they see upside in exiting their deals a year early.

ESPN has had financial pressures in some areas over the last year, causing it to lay off staff and look for ways to reduce expenses. By unloading NASCAR rights in 2014, ESPN would be able to eliminate production costs and shed its roughly $270 million annual rights fee.

NASCAR-related production costs are a concern for ESPN executives, particularly during the first half of the season when ESPN has rights only to the Nationwide Series.

Between February and July, ESPN spends a lot of money to bring production equipment and crews to 14 tracks for the Nationwide Series. From late July to November, it has the rights to broadcast Sprint Cup races, which typically take place the same weekend and at the same venue as Nationwide races. In the latter half of the year, ESPN can spread its production expenses across two races. For the first half, it spends the same amount on a single Nationwide race, and has had trouble balancing its books off that.

ESPN also has experienced a difficult ad sales environment around NASCAR, according to sources at the company. Next year promises to be especially tough for a lame-duck rights holder incapable of offering multiyear advertising deals around the sport.

Turner gradually has been unwinding its ties to NASCAR over the last two years. The company sold the rights to NASCAR.com back to the sport in early 2012. It still handles digital sales for the sport, but its executives no longer see the value in showing six Sprint Cup races in the middle of the summer, especially after ratings sunk this year to the lowest level in 29 years.

However, Fox and NBC see advantages in picking up their broadcast rights a year early. For Fox, the added 14 Nationwide Series races during the first part of the year would bolster programming and draw viewers to its new network Fox Sports 1. For NBC, the added 13 Sprint Cup and 19 Nationwide Series races would bring NASCAR’s big fan base to NBC Sports Network and give the cable network another asset to leverage in carriage negotiations with cable and satellite companies — both a year earlier than expected.

And even with a much shorter window, NBC still would have nearly a year to prepare to broadcast NASCAR.

The talks won’t change NASCAR’s long-term TV picture. Between 2015 and 2024, NASCAR will collect more than $8.2 billion in media rights from Fox and NBC, which signed 10-year, $3.8 billion and $4.4 billion deals, respectively. The networks together will pay an average of $820 million a year, a 46 percent increase from the $560 million that NASCAR currently receives annually from Fox, Turner Sports and ESPN.

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