VERSUS/GETTY IMAGESDuring its previous television talks, the NHL went to
Versus after it became obvious that ESPN wasn’t willing
to pony up.
Washington Capitals owner Ted Leonsis has an interesting way to describe the 93-year-old NHL this season.
“We look like a growth company,” he said. “Right now, I’m bullish on the growth.”
There’s a reason for Leonsis’ optimism. The NHL is heading into the final year of its TV contract in a stronger position than it’s had in decades, with an expanded portfolio of corporate sponsors, strong digital traffic and strong ratings growth.
The league’s current position is completely different from the last time it negotiated TV deals at the end of a lockout that wiped out the 2004-05 season.
The results showed how much the work stoppage hurt the league’s leverage. The only way the NHL could keep its games on broadcast TV was to agree to a revenue-sharing deal with NBC, which included no rights fee. And the league left ESPN for Versus, which signed a three-year, $207.5 million deal, with an option for three more seasons that Versus has since exercised.
Owners and team executives expect the new deal to dwarf those numbers. One owner told SportsBusiness Journal that he expects to see at least a 50 percent jump in TV rights fees. That would push the league’s annual haul to more than $115 million and increase each team’s take to $3.87 million a year.
“You have to look at what arrows are green, yellow and red, and across the board all the arrows (for the NHL) are green,” said Leonsis, who declined to predict how much the league’s media rights fees would increase. “We’re well-positioned (for rights negotiations). There’s a lot of interest.”
Early signs suggest that a bidding war is developing. The league is expected to enter an exclusive negotiating period with Versus later this year, and Versus has made no secret of its desire to renew with the NHL, which consistently brings the highest ratings to the Comcast-owned sports channel. NBC also has said that it would like to keep its rights package.
But others are lurking. ESPN said it wants to be involved. And sources said Fox Sports is considering whether to bid on a package.
The ACC’s most recent media deal showed how multiple bidders can drive up rights fees. Sources said that ESPN increased its bid by $35 million per year once Fox Sports showed interest in the conference’s rights earlier this spring.
NHL executives have worked quietly behind the scenes to fuel that kind of interest. During the Vancouver Olympics in February, for example, NHL Chief Operating Officer John Collins was spotted at a high-top table before the first U.S.-Canada hockey game chatting with ESPN President George Bodenheimer. Four months later, Collins took in Game 6 of the Stanley Cup Final with NBC Sports & Olympics Chairman Dick Ebersol. He’s had informal contact with top executives at almost every TV network.
NHL Commissioner Gary Bettman, Deputy Commissioner Bill Daly and Collins will lead negotiations, which are set to formally begin when Versus exercises an option to open an exclusive negotiation window. From there, it’s anybody’s guess what will happen.
“Do I think there’s a big windfall of money for the NHL? I’m not sure,” said Mike Trager, chairman of The Trager Group, a media consultancy. “Could they sustain where they are and have a nice incremental increase? Absolutely. They’re in substantially better position than they were five years ago.”
GETTY IMAGES“What we’ve done now is
rebuilt the platform to take
the next step. That next step
is huge.”John Collins
chief operating officer, NHL
Superserving the fan
The NHL’s current TV deal shows how far the league’s leverage had fallen in 2005. At the time, the NHL had to wait until players and management agreed to a collective-bargaining deal before it could start negotiating TV deals.
The two sides finally came to a labor agreement in the summer of 2005, leaving the NHL a little over two months to negotiate and sign TV deals worth hundreds of millions of dollars.
Bettman was adamant that the league wouldn’t agree to a deal worth less than $60 million annually. But Mark Shapiro, the top programming executive at the time with the league’s previous partner, ESPN, told the league that the network would pay no more than $30 million for rights.
NHL executives scurried to find another suitor. That’s when Versus, then named OLN, stepped up. At the time, Versus wanted to use major sports leagues to help it grow. It targeted the NHL first, and expected that it eventually would cut a deal with the NFL.
NHL executives soon found themselves locked in a conference room with top Comcast executives at New York law firm Cravath, Swaine & Moore hammering out an agreement that put the NHL on Versus. The deal was signed in four days.
But a significant faction within NHL offices wanted the league to accept less money and stay with ESPN. The naysayers did not want to leave a dominant sports media company for an unknown channel that was in only 64 million homes and was best known for field and stream programming.
Executives wondered: Could the league be a trailblazer on an unproven network, or would it be forgotten? No one knew the answer. All they knew was their options were limited.
“Nobody wanted the product,” said John Shannon, the NHL’s former executive vice president of broadcasting. “Under the circumstances, it was a pretty good deal. Was it a home run? No. Did it take them off the mainstream? I would argue the lockout did anyway.”
The first two seasons, in particular, were rough on Versus, marred by distribution battles, depressed ratings and production issues. Comcast battled with Dish Network and Cablevision for distribution. When the Anaheim Ducks made a playoff run, local fans complained that the channel wasn’t available in their market.
The network averaged a 0.2 Nielsen rating and 118,175 households for Versus’ first regular season, down 60 percent from ESPN’s coverage in 2003-04.
By all accounts, Versus began to turn things around in 2007. In the past two years, its distribution increased, its production quality improved and its viewership numbers climbed.
Versus carried more playoff games nationally, and viewers followed. Last season, the network averaged 775,000 viewers through the first 54 telecasts of the Stanley Cup playoffs, marking the best audience figure for the first two rounds since 1994 when Nielsen first made viewership totals available. The second Stanley Cup Final game posted a 2.0 U.S. rating and 3.6 million viewers, Versus’ highest rating in network history.
GETTY IMAGESNBC will be looking to stay in the game during the
upcoming talks, but the league will be expecting a
rights fee this time.
“When you look at what has come from the success of us working with the league and treating hockey as a top priority like no one else has ever done before, there’s huge success,” Versus President Jamie Davis said. “This is because of the way we handle hockey. We continue every year to add on and to superserve the fan.”
The partnership has enriched both parties with more than just ratings. With the NHL’s help, Versus has increased its distribution from 64 million households to 75 million and its asset value has doubled from $625 million to $1.3 billion. Last year, cable and satellite operators paid 26 cents per subscriber per month for Versus, according to numbers from SNL Kagan.
With Comcast’s distribution help, the NHL launched the NHL Network in the United States soon after. It now collects affiliate fees for more than 35 million households and expects to be in more than 50 million homes by the end of the year.
“[The deal] resulted in significant incremental distribution for Versus and raised consumer awareness of the channel,” said Doug Perlman, a former NHL Enterprises executive who helped negotiate the deal. “Versus has treated the NHL extremely well, clearly made it a priority and the league is thriving in part because of how Versus has treated the property.”
Turnkey Sports PollThe following are results of the
Turnkey Sports Poll taken in
September. The survey covered
more than 1,100 senior-level sports
industry executives spanning
professional and college sports.
Building scale
The NHL is happy with Versus, but there’s no guarantee it will renew its deal. The league already showed a willingness to explore other options in 2007 when Bettman opened talks with ESPN.
Plus, there’s a strong sense in the league office that it’s positioned for a much better deal this time.
As Comcast was expanding Versus, the NHL undertook a massive effort to improve its business. The league hired Collins in 2006 as a vice president of marketing and developed a three-year strategy for converting fans of specific NHL clubs into fans of the NHL. The idea is to build fans who would want to watch NHL action, regardless if their favorite team is playing. The league has long complained about fans who lose interest in the playoffs once their team is eliminated.
The league focused on improving its digital content, expanding its corporate sponsorship portfolio and launching major events.
The NHL redesigned its website in 2008. Since then, NHL.com has seen traffic increase 25 percent. The league’s out-of-market, digital package known as GameCenter Live has increased its subscriber base by 255 percent. That growth drove a 191 percent increase in digital ad sales, according to the league.
Corporate sponsorships also skyrocketed. The league added blue-chip partners like Bridgestone, Cisco and Geico in the U.S. It says corporate sponsorship revenue rose 162 percent in three years after it signed more than $330 million in new deals.
New events drove many of those sales. The NHL hosted its first outdoor hockey game in the U.S. in Buffalo on Jan. 1, 2008. The Winter Classic was broadcast on NBC opposite college football bowl games and still managed to set a record rating for a regular-season NHL game. The event has since been played at Chicago’s Wrigley Field and Boston’s Fenway Park and has joined the Stanley Cup Final as a signature event.
The league also revived its end-of-the-year awards show, moving it from Toronto to Las Vegas where it could be more of a hospitality event for team and league partners.
The combination of new events, new sponsorship dollars and new Web traffic will be at the heart of NHL executives’ pitch this year.
“Where we are today is exactly where we said three years ago we hoped to be,” Collins said. “We have proof of a more active fan base. Things like the Winter Classic have put so much momentum into the business on a fan base and advertising (front).”
League executives are confident they will negotiate a more favorable rights agreement this time around.
“What we’ve done now is rebuilt the platform to take the next step,” Collins said. “That next step is huge.”
Just how huge that next step is won’t be determined until later this year. In the meantime, Collins will be out whipping up support for the NHL and selling potential partners on its business growth and momentum.
The question is — will broadcasters see things the same way?
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