Group Created with Sketch.
Volume 22 No. 27
  • Created with Sketch.
  • Created with Sketch.
  • Created with Sketch.

NHL's long-term business plan pays off

Media rights fee nearly triples in new deal with NBC, Versus

Comcast’s Brian Roberts was talking with NHL Commissioner Gary Bettman nearly two weeks ago. The two high-ranking executives had known each other a long time. Bettman has been the NHL’s commissioner for 18 years, and Roberts’ Comcast has owned the league’s Flyers franchise for 15 years through Comcast-Spectacor.

Though the two are friends, Bettman had a tough message to deliver: Days earlier, ESPN told the league that it would make an aggressive bid on the NHL’s media package. Bettman told Roberts that ESPN’s planned bid of $160 million to $170 million per year would test NBC’s and Versus’ right-to-match clause, which several media executives described as the tightest such clause they had ever seen. The clause gave NBC the right to match any deal the NHL signed with another network.

But it would be hard for NBC to match ESPN’s planned offer. ESPN told the NHL that it would televise every Stanley Cup playoff game nationally. ESPN said that it would stream the games to authenticated broadband and mobile users. And ESPN guaranteed an international component as part of its planned offer. ESPN’s deal would include a regular-season Game of the Week, but it was not making the broadcast network ABC available. The details were new for Roberts, who did not want to lose the NHL. In early discussions with the league, the NBC Sports Group had resisted the idea of televising every Stanley Cup playoff game nationally. And Comcast could not match ESPN’s streaming plans or international offerings.

It was clear to Roberts that ESPN’s plan was expansive enough that NBC would have trouble matching. He assured Bettman that his company would come up with a plan.

Roberts left the NHL’s offices and huddled with his lieutenants. Days later, NBC’s Dick Ebersol approached the NHL with a new offer. NBC would pay the NHL $187 million per year over 10 years. It would telecast every Stanley Cup playoff game on NBC, Versus and at least one other national cable channel (executives would not identify which one). NBC and Versus would have 100 exclusive windows per season for regular-season games, nearly double the current 60. And NBC committed to broadcast a national game the Friday after Thanksgiving, a day traditionally reserved for college football.

NBC had a deal. The NHL’s top brass, Bettman, Deputy Commissioner Bill Daly and Chief Operating Officer John Collins, never went back to ESPN.

The deal is a financial windfall for the league, which is getting $77.5 million a year for its domestic rights. The league thinks telecasting each Stanley Cup playoff game nationally will create the same sort of excitement the NCAA garnered this year during the NCAA tournament.

“This was something really, really important to the league,” Ebersol said. “There was a period where they were free to go out and show their wares and see how pretty the rest of the world felt they were. … Out of this came, I think from everybody who was seeking a deal with the NHL, they wanted an expanded, exclusive playoff relationship where all the games would be visible on the platforms of one company or another.”

The NHL reaped this revenue increase without having to give up its international rights. The league has planned for some time to sell the international rights separately, but around the same time as its domestic rights. Now, with one deal done, most observers expect the international rights to bring in even more money.

“The league can do an international TV and broadband deal without having to split revenue,” said John Shannon, the former NHL executive vice president. “That is huge for the league. I suspect they’ll sign something with ESPN International or Sky. I think the NHL could double their [European] revenue easily.”

The NHL began setting the table for last week’s deal in the fall of 2006, when Bettman hired Collins as COO and charged him with growing the business. Collins launched several big events that became instantly popular, like the Winter Classic. Collins also oversaw significant growth in the media arena, particularly with NHL Network and In February, these changes helped the NHL sign its biggest ever sponsorship deal, with MillerCoors committing to $375 million over seven years to support the league in both the U.S. and Canada.

“We accomplished just about everything we wanted to accomplish,” Collins said of the NBC deal. “We’ve gathered the necessary support from NBC Universal to continue the significant growth that we’ve been able to exhibit on our league platforms.”

The interest in the NHL’s rights shows that the league’s growth plan has worked, a big difference from the last time the NHL negotiated a media deal in 2005, coming out of a lockout. “I remember at the time an ESPN executive being very dismissive of us,” said Washington Capitals owner Ted Leonsis, referring to ESPN’s former programming head Mark Shapiro. “We were down as a league. And we were down as owners.”

Leonsis said he was gratified by the level of media interest this time.

Versus’ and NBC’s exclusive negotiating windows with the NHL ended in late January, allowing the league to gauge interest from other networks.

At the time, the two sides were not particularly close. But NBC knew it wanted to keep the NHL, sources said, and believed its right-to-match clause gave it enough insurance to allow the league out of the exclusive window.

Three suitors immediately emerged.

Fox, which held the NHL’s rights from 1994 to 1999, discussed picking up a package for FX. Fox’s talks were never serious, and the broadcaster dropped out of the running quickly and never submitted a proposal.

Turner was more intrigued. It wanted a package for its TruTV channel, and proposed an NBA-style deal where Turner would manage the league’s digital assets.

The NHL was not interested initially. But after a tour of Turner’s Atlanta studios, they became more intrigued.

Turner’s president of sales, distribution and sports, David Levy, wanted to do a deal. But, sources said, Levy was scared away by the sport’s low ratings. TruTV’s prime-time programming far out-rates the NHL. For 2011 to date, TruTV has averaged 1.1 million viewers in prime time. The NHL on Versus averaged 353,000 viewers in prime-time games this season.

Once Turner realized how much ESPN and NBC were committing to pay the league, it pulled out and did not submit a formal proposal.

For its part, ESPN did not submit a formal proposal, either. But its level of interest helped pushed the rights fee to an all-time high for the league.

“When we looked at the entire package and the relationship to us, it was clear that we were going to be with the incumbent,” Bettman said. “It’s nice to feel pretty.”

Staff writer Fred Dreier contributed to this report.

Inside the regular-season numbers for the NHL

Regular-season viewership on cable TV

2010-11 Versus 53 353,000
2009-10 Versus 52 297,000
2008-09 Versus 54 318,000
2007-08 Versus 56 272,000
2006-07 Versus 58 212,000
2005-06 Versus 56 162,000
2004-05 Season canceled due to lockout
2003-04 ESPN2 50 282,000

ESPN 20 531,000

Regular-season viewership on broadcast TV

2010-11 NBC 11 1.0 1,621,000
2009-10 NBC 10 1.0 1,560,000
2008-09 NBC 10 1.0 1,530,000
2007-08 NBC 10 1.0 1,400,000
2006-07 NBC 9 0.9 1,344,000
2005-06 NBC 6 1.0 1,376,000
2004-05 Season canceled due to lockout
2003-04 ABC 5 1.1 1,547,000

Note: Averages do not include Stanley Cup Final or playoffs.
Source: Austin Karp, SportsBusiness Daily