SBJ/July 21-27, 2014/Media

James assists Fox RSNs in two markets

LeBron James’ move to Cleveland could benefit Fox Sports as much as the Cavaliers over the next few seasons.

That’s because the media company, which owns both FS Ohio and Sun Sports in Florida, gained the upper hand in its leverage position in both markets when the teams’ media deals end.

James’ return to Miami would have given the Heat a negotiating advantage, and it already had planned to open negotiations for an extension with Sun Sports. The Heat’s current deal with Sun Sports runs for four more seasons, expiring after the 2017-18 season. Sun Sports pays on average $20 million per year for the rights.

 
When James picked the Cavs, it gave FS Ohio and Sun Sports the upper hand in rights talks.
James’ decision on July 11 to return to Cleveland changes the tenor of those talks.

Meanwhile, in Ohio, FS Ohio controls the Cavaliers rights into the next decade, sources said. FS Ohio’s TV deal with the Cavs is valued at $25 million per year and ends after the 2015-16 season. However, the media company has contractual rights to extend the Cavs’ media deal well beyond that and is certain to do so.

Neither Cavs nor Fox executives would comment on their TV deal.

In the ensuing years, FS Ohio certainly will increase its advertising rates around Cavs games significantly, since the 10-time NBA All-Star James has proved to be a local TV ratings juggernaut for regional sports networks. In James’ last two years in Cleveland (from 2008 through 2010), the Cavs were the top-rated NBA team locally, averaging an 8.66 local rating on FS Ohio. In the past two seasons, without James, the Cavs’ ratings averaged a 2.85, a drop off of 67 percent. Meanwhile, in Miami, Heat games on Sun Sports averaged a 7.0 rating over the last two seasons with James. For the two seasons before James came to South Beach, the team averaged a 2.60 rating, 63 percent less.

Of course, James’ return is also certain to be a boon for the Cavs, who capped combined full- and half-season ticket sales at 12,000 after James announced his decision to return to his hometown team. The team set up a waiting list of partial-plan holders based on seniority; they’ll receive the first chance to buy full-season plans when they become available.

The team this week will begin selling 10-game packages, but doing so at the same prices as last season.

The Cavs did not raise season-ticket prices after James signed, but they had not announced prices for their remaining individual tickets and group sales inventory as of last week. Team executives said they will take a deliberate approach to leveraging their newly added marquee attraction.

The team also is in the process of selling its remaining suite inventory, though the team would not disclose specifics of what is available.

“We want to make sure there is plenty of opportunity,” said Kerry Bubolz, president of business operations for the Cavs. “We are taking a disciplined approach and thinking long term.”

One of the biggest areas of revenue opportunity for the Cavs is in its sponsorship business. The team does not yet have a floor apron deal, among the most lucrative pieces of sponsorship inventory for league franchises, with deals valued between $750,000 and $1.2 million annually.

The Cavs also likely will be able to attract more national and international sponsors as demand grows around the team.

“We will first address sponsorships on a local, regional and national basis,” Bubolz said. “China is an area where we have done business before.”

Given that James last year was the league’s top jersey seller for the sixth time, the Cavaliers can expect a merchandise windfall, as well. Cavs guard Kyrie Irving last year ranked ninth in leaguewide jersey sales.

“This is bigger than just the Cavs” Bubolz said. “This goes beyond the walls of the arena.”

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