SBJ/Sept. 16-22, 2013/Media

CBS’s McManus says patience in building sports net will pay off

John Ourand
We’re in the middle of the most expensive period in the history of televised sports, with more channels spending more money to pick up more rights.
 
In such an active market, however, one of the industry’s oldest players, CBS Sports, has remained quiet.

This year, CBS opted not even to kick the tires when Fox Sports and NBC Sports Group agreed to pay NASCAR a combined $8.2 billion for rights through 2024. It remained on the sideline as Fox outbid NBC for the rights to golf’s U.S. Open. Its executive team also opted not to match ESPN’s $75 million-a-year bid to swipe U.S. Open tennis rights, an event that CBS has produced since 1968.

These moves — or, rather, the lack of them — have caused some industry observers to scratch their heads, wondering why a broadcast network that runs an all-sports cable channel wouldn’t be more involved.
“We’ve said all along that we’re not currently in the marketplace for hundred-million-dollar deals,” said CBS Sports Chairman Sean McManus. “But we’re trying to improve our programming, which I think we’ve done dramatically by doing smart deals.”

McManus said the industry will see sports rights fees level off when cable networks are more fully distributed.
Photo by: PATRICK E. MCCARTHY
Two of those deals were announced in the past couple of weeks. In late August, CBS sublicensed American Athletic Conference football and basketball games from ESPN. Earlier this month, it sublicensed Big East games from Fox. Except for two Big East basketball games, the entire schedule will be on CBS Sports Network, CBS’s all-sports cable channel. For McManus, these deals represent a small but significant step as CBS builds out its cable channel.

“This scenario really is a win-win-win situation,” he said. “The primary rights holder gets revenue to amortize its rights fee, the conference gets additional exposure for its schools, and CBS Sports Network acquires high-quality content. It only works when all three partners gain value, which in these arrangements they do.”

CBS Sports’ slow-and-steady strategy with CBSSN has centered on producing blocks of live programming. It started producing more studio programming and simulcasting radio programs. CBS Sports uses its cable channel to enhance big events, adding bonus coverage to the Masters, PGA Championship and the NCAA tournament. Last week, it started producing a three-hour NFL pregame show in the run-up to its Sunday afternoon telecasts.

“We’re trying to be smart about this. We’re trying to be strategic,” McManus said. “We have a long-term plan that is maybe not as immediate as some other people have. But for our company, it is the right strategy. We’re patient. Eventually, that patience will pay off.”

CBS’s decision not to get involved in big rights negotiations is not a sign that it has concerns that a sports rights bubble is about to collapse. Rather, CBS Sports executives want to build up CBSSN before getting involved with the bidding.

“There’s been a sports rights bubble since the 1960s,” McManus said. “Obviously, rights fees continue to go up, but the reason they continue to go up is that sports is the most valuable content in all of media right now.”

McManus believes prices will level off as networks mature but he said they are not likely to come down.

“There will come a time when there will be an adjustment in the rights paid — when cable networks are more fully distributed and they’re getting the kind of sub fees that they want,” McManus said. “But I don’t think that adjustment is right around the corner because there’s still so much competition for what is a limited amount of inventory.”

Sources say CBS is not a serious player in picking up NBA or Big Ten rights — the next two big rights deals that will come to market. But expect the broadcaster and its cable channel to become more involved during the next round.

“At some point in the future, we will be in a position where we can bid for cable and network rights for some of these major events,” McManus said. “At this point in our history, it just doesn’t make sense for us financially to do that. But at some point, it certainly will make sense.”

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

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