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Volume 20 No. 46

In Depth

Five months after ESPN signed a deal that gave it the rights to make MLS games available directly to consumers, the network’s executives still don’t know what that offering will look like. It’s the same story with ESPN and the NBA’s plan to offer an over-the-top service. Only two weeks after finalizing the NBA deal, ESPN doesn’t know what the service will look like, what content it will carry, or even what it will be called.

“We still have to sort through the details,” said Norby Williamson, ESPN executive vice president of production, program scheduling and development.

This push to grab rights for platforms and services that don’t yet exist underscores the pressure faced by sports networks these days. They need to continue expanding their businesses during a time when most major sports rights are tied up well into the next decade.

ESPN’s strategy in the coming years will focus on new platforms — so much so that ESPN President John Skipper

Turner’s and ESPN’s new deals with the NBA took one of the last remaining major sports properties off the table.
Photo by: NBAE / Getty Images
described the effort to increase digital ad sales revenue as “probably, in the next two or three years, our largest revenue opportunity.”

“We have to think about other business models,” Skipper recently told reporters. “We’re not far along on any of them. But we do think about how we might capture more money direct from the consumer.”

When ESPN and Turner signed deals worth $24 billion to lock up the NBA’s rights


SBJ Podcast:
Media writer John Ourand and Executive Editor Abraham Madkour discuss the NFL's Thursday night package with CBS and the NFL Network as well as the league's overall ratings strength.

through 2025, it took one of the last remaining big sports properties off the table, leaving the sports TV business in an unprecedented period of stability.

The NFL is certain to command a princely sum for its “Thursday Night Football” package, and the Big Ten Conference is expecting a windfall when its deal comes up in 2017. International soccer rights still don’t do long-term deals; the EPL, for example, will negotiate a new deal next year.

But the networks’ strategy of expanding their business by picking off sports rights — like Fox with the U.S. Golf Association, NBC with NASCAR, and ESPN with Wimbledon — largely is at an end until at least 2020 when the NHL’s rights are up with NBC and the whole rights negotiation process starts again (see charts below).

Throw in a changing television landscape — even NBCUniversal CEO Steve Burke acknowledged last month that TV ratings would continue to drop in the coming years — and you have network executives looking for areas of revenue growth.

Inside the offices of each network, executives have different points of view about the best ways for their media business to grow:

Already a leader in the digital sports arena, ESPN sees a main area of growth coming from its digital business.

As the most-viewed TV network in prime time for 11 of the past 12 seasons, CBS Sports is placing its biggest bets on the continued growth of its broadcast business to drive revenue.

Just 14 months since the launch of Fox Sports 1 and Fox Sports 2, Fox Sports still believes in the revenue potential of cable sports channels.

Thanks to exclusive deals with properties such as the Olympics, NHL, EPL and Formula One, NBC Sports Group aims to grow by marketing and building up those sports.

“Different networks grow in different ways,” said Jon Miller, programming president for NBC Sports Group. “It’s all about developing deeper forms of fan engagement.”

The digital push

Since around 2010, the cable industry has been pushing TV Everywhere, which allows its subscribers to stream channels on any device. Networks launched apps like WatchESPN and Fox Sports Go, which enabled the country’s biggest sports events to be live-streamed to authenticated users.

ESPN is focused on its digital business and adding value to that inventory for advertisers.
Photo by: Joe Faraoni / ESPN
If networks are looking to increase revenue, it would seem that digital would be the first place they look.

“I’m sure that each network and each distributor is thinking about unique ways to distribute their content,” said Gary Stevenson, president and managing director of MLS Business Ventures, who negotiated the league’s over-the-top deal with ESPN. “They have to be looking at how to get unique content to consumers when and where they want it.”

Advertisers slowly have been spending more money on digital. Burke referenced such a move last month on Comcast’s third quarter earnings call. “There is clearly a shift to digital,” he said. “You can’t talk to a marketer or an advertising agency that isn’t talking about shifting dollars to digital.”

For ESPN’s Skipper, though, those dollars aren’t shifting quickly enough.

“We need to be able to increase the value of our digital inventory, then figure out how to sell it better,” he said. “All of the video inventory on and mobile is not sold out and it’s sold for lower CPMs [than TV]. We’ve got to get those CPMs up. To our point of view, a digital video impression on should be just like a 30-second commercial on ‘SportsCenter’ on television.”

Of course, most of ESPN’s revenue growth over the next several years will remain rooted in cable. In fact, ESPN makes about the same from annual increases in its affiliate fees as networks like NBC Sports Network and FS1 make in total. Distributors pay ESPN around $5.50 per subscriber per month — a fee that rises around 5 percent every year.

ESPN has long-term contracts with most of the major distributors, meaning that revenue is fixed for many years.
That’s a main reason why Skipper is so eager to figure out how to make more money from digital.

All TV networks have a foot in the digital business, from Turner Sports’ management of the NBA’s digital assets, to CBS’s recently announced All Access over-the-top product.

But while networks like CBS Sports and Fox Sports are active in the digital space, they believe they will see the most revenue growth from broadcast (thanks to retransmission consent fees and ad sales) and cable (thanks to affiliate fees and ad sales).

“Digital is important because you want to make sure that your content is available to fans wherever they want to consume it,” said CBS Sports President David Berson. “We’re obviously always looking at expanding distribution and utilizing new technologies. But to be clear, the lion’s share of consumption is still on television.”

Similarly, Fox Sports has launched digital businesses, from the direct-to-consumer Fox Soccer 2Go to the TV Everywhere product Fox Sports Go. FS1 general manager David Nathanson said these products are set up to be complementary to Fox’s core television business.

“As we’ve seen growth on Fox Sports 1, we’ve seen download growth of the Fox Sports Go app, viewership growth in the number of streams viewed, particularly from marquee events like postseason baseball,” he said. “It’s extremely complementary to our rights and something that we focus on as we produce our product.”

Television still matters

Both Berson and Nathanson believe the traditional television business has much more growth potential over the next six to eight years than digital. While both media companies run broadcast networks, cable channels and digital platforms, their focus is different.

Of the two, CBS Sports is most focused on its broadcast channel. Fox Sports is more focused on its cable sports

Fox is bullish on increasing affiliate fees for its Fox Sports 1 and Fox Sports 2 networks.
Photo by: Getty Images
channels, FS1 and FS2, which launched in August 2013.

“We have a different perspective and strategy than others in that we firmly believe in the broadcast business and our broadcast network,” Berson said. “We feel that we have a solid model, and we’re thrilled that we’ve been able to quietly extend with our rights partners for a long time.”

Broadcast television still commands the biggest audiences and top ad rates, Berson said. As other networks have gotten into bidding wars for live sports rights, CBS has remained more disciplined. The network outbid others for the rights to “Thursday Night Football,” signing a one-year deal with the NFL and holding an option on a second year. In addition to CBS’s $275 million offer for the package, it was the strength of CBS’s broadcast schedule, particularly on Thursday night, that convinced the NFL to go with the network. It’s no surprise that “Thursday Night Football” was the top-rated show all seven weeks this season.

Big ratings like these bring in more advertising revenue and position CBS for retransmission consent negotiations.

Fox Sports’ focus is on its cable sports channels, which have room to increase distribution and affiliate fees. FS1 is in 85 million homes, and FS2 is in 45 million, according to Nielsen. FS1’s affiliate fee range from around 25 cents per month for distributors like DirecTV that have older deals, to more than 50 cents for distributors such as AT&T and Cox that have newer deals.

That’s the kind of affiliate fee growth — going from $255 million per year to a potential $510 million per year if every distributor signs a new deal — that Fox Sports expects to see over the next several years.

Relying on growing affiliate fees has proved to be a risky strategy, as distributors have pushed back against big increases. For example, Fox Sports was looking to get as much as 80 cents per subscriber per month for FS1 when it launched.

Still, Nathanson sees a lot of potential in the cable network’s growth prospects and believes viewership during the MLB playoffs shows the channel’s potential. The channel’s top five shows and seven of its top 10 are 2014 MLB postseason games, topped by the NLCS Game 4 that had 5.092 million viewers.

“We’re uniquely positioned because we’re brand new,” Nathanson said. “Everything we do is new and an opportunity to grow.”

FS1 will start carrying NASCAR races and U.S. Open golf next year. Its coverage of the World Cup starts in 2018.

“Our hope is to see growth in our distribution in terms of the number of homes we reach, growth in terms of the quality of that audience, the length of tune-in of that audience, the demographic makeup of that audience, growth in terms of the number of advertisers both in terms of diversity but also in terms of the amount that they commit to us,” he said.

Turner Broadcast System President David Levy said long-term deals, like the ones Turner has with MLB, the NCAA tournament and the NBA, give distributors comfort that the high-rated programming will stay on Turner’s channels for a long time.

“It helps in negotiations with MSOs because they know what they’re looking at; it gives them security,” Levy said. “It also gives our ad department the opportunity to sell longer-term packages.”

Marketing what you have

Burke made news during Comcast’s earnings call when he said NBC is likely to move some sports to USA Network. It’s not a leap to think that means that some NHL playoff games or the start of some Formula One races will move from CNBC to USA, which is in about 3 million more homes.

NBC’s “Sunday Night Sports Report” focuses only on sports that have relationships with the network.
That’s growth, right?

But Miller said NBC has no firm plans yet — at least none that he was prepared to talk about publicly. Besides, he said NBC Sports Group is focused on other areas for growth.

“We continue to invest in our properties to make them grow,” he said. “When our partners are successful, we will benefit in their success.”

Owned by the country’s top cable operator in Comcast, NBC Sports Group has a large portfolio of national sports channels, regional sports networks, broadband sites and streaming apps. But when asked where NBC Sports Group would place its focus, Miller did not mention any of those platforms. Nor has NBC been collecting OTT rights.

Rather, Miller spoke about putting the company’s marketing and programming muscle behind the league partners with which it has deals.

For example, he pointed to NBC Sports Network’s NASCAR studio show, “NASCAR America” that it started producing more than a year before the network produces its first race. He also mentioned the channel’s “Sunday Night Sports Report,” a show that focuses only on the sports that have relationships with NBC. These shows, along with NBC’s companywide marketing initiatives around its biggest events, are part of the network’s strategy to focus on its league partners’ business as a way to increase its revenue.

The Masters CBS, ESPN Year-to-year
NFL Thursday Night Football CBS 2014
EPL NBC 2015
Preakness/Belmont NBC 2015
Conference USA football championship ESPN 2015
Formula One NBC 2016
Big Ten football championship Fox 2016
Conference USA CBS Sports Network, Fox 2016
Big Ten CBS, ESPN 2017
British Open ESPN 2017
UEFA Fox 2017-18
American Athletic Conference CBS, ESPN 2019
UFC Fox 2019
PGA of America Turner 2019

“We want to get people familiar with the idea that NBC Sports is the new home for NASCAR,” Miller said. “We have developed our studio programming specifically around the properties and fans that we serve. It’s important to know what you’re not, and we’re not all things to all people.”

NBC has won much praise for its coverage of the EPL, using multiple platforms to make every game available and producing studio shows around those games. The problem is that NBC Sports Group has built the EPL up so much, it has made the property more attractive to other bidders like ESPN and Fox Sports. Negotiations on a new deal are expected to start next year.

“It’s like running for Congress,” Miller said. “You spend two years trying to get elected. Then as soon as you get elected, you turn around and start campaigning all over again.”

For most other rights, though, the campaigning by the networks has stopped until the next decade. The focus turns to executing on their respective growth agendas.

Mountain West Conference* CBS Sports Network, ESPN $116 million/7 years** 2019-20
NHL NBC $2 billion/10 years 2020-21
PGA Tour CBS, NBC N/A/9 years 2020-21
NFL ESPN $15.2 billion/8 years 2021
MLB ESPN $5.6 billion/8 years 2021
MLB Fox $4.2 billion/8 years 2021
MLB Turner $2.6 billion/8 years 2021
Australian Open ESPN N/A/10 years 2021
NFL DirecTV $12 billion/8 years 2022
NFL Fox $9.9 billion/9 years 2022
NFL CBS $9 billion/9 years 2022
NFL NBC $8.55 billion/9 years 2022
Pac-12** ESPN/ABC, Fox/FSN/FX $3 billion/12 years** 2022-23
MLS** ESPN, Fox $600 million/8 years*** 2022
FIFA World Cup*** Fox $450 million-$500 million/8 years 2022
FIFA World Cup*** Telemundo $600 million/8 years 2022
MLS Univision $120 million/8 years 2022
WNBA ESPN $72 million/6 years 2022
Wimbledon ESPN $480 million/12 years 2023
NASCAR*** NBC $4.4 billion/10 years 2024
NASCAR*** Fox $3.8 billion/10 years 2024
NCAA Men’s Div. I basketball tourn. CBS, Turner $10.8 billion/14 years** 2024
SEC CBS $825 million/15 years 2023-24
French Open NBC N/A/12 years 2024
NBA*** ESPN $12.6 billion/9 years 2024-25
NBA*** Turner $10.8 billion/9 years 2024-25
College Football Playoff^ ESPN $7.3 billion/12 years 2025
Big 12 Fox/FSN/FX $1.2 billion/13 years 2024-25
Big 12 ESPN/ABC $1.3 billion/13 years 2024-25
U.S. Open (Tennis) ESPN $825 million/11 years 2025
Big East Conference Fox $500 million/12 years 2024-25
Notre Dame NBC N/A/10 years 2025
U.S. Open (Golf)*** Fox $1.12 billion/12 years 2026
ACC ESPN $4.2 billion/15 years 2026-27
Big Ten Conference Big Ten Network $2.8 billion/25 years 2031-32
Olympics (U.S. rights) NBC $7.65 billion/12 years 2032
SEC ESPN/ABC $6 billion/20 years 2033-34

N/A: Not available
Note: All contracts may share rights with related networks. For example, ESPN contracts may share rights with ABC, NBC with NBC Sports Network, Fox with Fox Sports 1, and CBS with CBS Sports Network. Telemundo is owned by Comcast/NBC.
* CBS Sports Network and ESPN will alternate game selections in football and men’s basketball, with ESPN controlling the rights to Boise State home football games. CBS Sports Network retains the rights to Boise State road football games.
** Combined total for both networks
*** Deal has not begun yet
^ Figure takes into account the $215 million annual payout ESPN has committed to the “contract” bowls — the Rose Bowl, Champions Bowl and Orange Bowl — in addition to the playoff package.
Sources: Conference Form 990s filed with the IRS; conference officials, SportsBusiness Journal research

It’s no secret that live sports rights are the lifeblood of sports networks. Big events bring big audiences that, networks hope, spill over into live studio programming.

But network executives say they will look closer at niche sports and studio-based programming to draw audiences.

“There’s a natural sense of the properties and brands that we can create to drive viewer engagement,” said Norby

Williamson, ESPN’s executive vice president of production, program scheduling and development.

As an example, Williamson referred to ESPN’s decision to hire Keith Olbermann last year as a move to expand the company’s nonevent programming. He also pointed to Colin Cowherd’s college football show, suggesting that it may expand to multiple days per week during college football season.

“Given the competition and the number of platforms that we have and the challenge on a minute-to-minute basis of how we need to differentiate our content from competitors, talent is more consistently important today than it probably has ever been in the industry,” he said.

CBS Sports Network is using a mix of niche sports and studio programming to build out its schedule. CBS Sports uses network talent such as James Brown, Jim Nantz and Bill Cowher on its cable channel, in an effort to increase viewership.

“We’re maximizing assets we have to help grow the network,” said CBS Sports President David Berson.

CBS Sports Network has tripled the number of live hours on its network over the past couple of years, and doubled the number of live events through deals with leagues and conferences like the Professional Bull Riders, Mountain West Conference and Big East. The PBR generally pulls in around 1.7 million viewers for its events on CBS broadcast network, which is a good number for a niche sport. CBS Sports Network is not Nielsen rated.

Said Berson, “You have to be smart and pick your spots. There’s stuff available, but you have to jump on it when it’s available.”

The vital importance of live sports programming has fueled the rapid rise of sports media license revenue. While event spectators through turnstiles number in the thousands, that figure is dwarfed by the many millions consuming your product via a host of media platforms. Thus your media deals directly shape the majority perception of your brand, in addition to representing a huge, growing revenue stream.

High-performing sports properties are unique enterprises, active in more than a dozen different businesses at once, typically executing across a single staff. Today, more than ever, media exploitation is at the heart of it all, driving revenue, promotion and branding. Maximizing enterprise performance and value are driven by optimizing your media rights strategy.

My experience has taught me that each media rights negotiation presents a momentous opportunity to position your business for long-term competitive success. These occasions are infrequent, so each team/property needs expert assistance developing and executing its plan. How do you maximize your next media opportunity? Meticulous preparation is the key. Solving your unique TV rights puzzle can be best achieved starting with a foundation built on answering the following critical questions:

Company Business Culture

With so many platforms, and so many options, sports properties are wise to do their homework before entering the media rights marketplace.
Photo by: Getty Images

1. Risk tolerance: Deep down, is your organization risk-tolerant or risk-adverse? Is team ownership prepared to absorb possible startup losses and/or performance variations? Do you prefer to focus on the basics of tickets, suites and sponsorship sales, and use your media deal as a way to lay off financial risk, or do you instead view media as an entrepreneurial avenue to be maximized?

2. Core competency: Is your organization media savvy, with extensive internal media sales, production, and marketing knowledge, active and current in today’s marketplace? Or does direct involvement in the business represent a departure from what you are truly good at?

Rights Valuation/Growth

3. Value metrics/drivers: What do you deserve for your rights? What is the fair market value today? Is your existing deal above or below market? What are the key drivers that establish value? What can you do to affect them? Which recent transactions are (and are not) appropriate comparables?

4. Cash flow/bonuses/growth rates: Do you think of your media revenue as integrated with your entire business, or rather as a means to fund new initiatives, or solve cash-flow issues? Is it better to front load, back load or ramp up your deal? What is typical? What kind of deal-over-deal increases can you expect? Should you ask for signing and/or performance bonuses?

Business Partners

5. Network profitability/priorities: What are the critical success factors for a sports network business? How do network affiliation/distribution agreements work? How important are ratings? What new initiatives and/or rights are

networks looking for today? How profitable is your current partner? What are the key drivers of its economics and how do your rights contribute? How much is available for rights fees and profit? What issues are must-haves or deal-breakers for Fox, CSN, ESPN or NBCSN?

6. New network dynamics/equity: What are the considerations for starting a new network (an RSN or team/league-branded platform) and/or distributing your games/product in nontraditional methods? Should you partner with other teams/leagues, private equity or a similar fund/investor, with a distributor, or go it alone? How does tiering work? What are the implications for obtaining full distribution? How should you look at equity value vs. rights fees? What are the key governance issues that you need to focus on in a media partnership?


7. Competitors: How competitive is your marketplace? What alternatives exist to your current distributor(s)? How much of a difference does this make in your value? How is your relationship with your current partner? Which potential partner might be best suited to your organization? What are the risks to changing partners? Is a third party or your existing rights holder best positioned to monetize your rights? How can you legally find out if your current agreement restricts you from having certain third-party discussions?

8. Geography/league rules/national networks: What is the impact of your territory/marketplace on your value? How many subscribers can you access? How does the value of your rights change with distance? What league outer-market limits/assessments are applicable? What is the current state of applicable league rules/subjugation, revenue-sharing parameters and network pre-emption/blackouts?

9. Industry trends: How do megatrends like over-the-top, cord cutters/shavers/nevers, social media and TV Everywhere affect your rights? How does industry consolidation affect the marketplace? Should you seriously consider a nontraditional platform?

10. Exclusivity/programming allocation: What are the benefits and value of exclusivity? What is your optimal game/programming allocation between platforms (over-the-air, cable network, broadband) or another platform (e.g., an alliance with an MVPD, Internet brand or retailer)?

Negotiation Strategy

11. Timing: When should you start preparations and negotiations? What are the advantages and disadvantages of negotiating a new deal early? How long should the process take? What are your existing obligations to your current partner, and how will they affect your strategy?

12. Process: Who should drive the negotiations process? Should you go first to outline your expectations or wait for a proposal? How should you react to proposed elements you don’t like? When should you involve the lawyers?

Business Integration

13. Media integration: How should your arrangements integrate with your sponsorship and ticket sales, community relations, digital platforms, arena/stadium operations and other important business initiatives?

14. Control: How important is it to control the production and presentation of your media content? Sponsorship/ad sales? Category exclusivity? What are the trade-offs? What alternatives maximize control while minimizing risk?

15. Marketing/promotion: What opportunities are available through a media agreement to maximize fan engagement with your brand and foster better awareness of your product? How can your deal better help to build your brand and market your franchise/league? What levels of on-air and tune-in promotion are advisable?

Key Nonfinancial Deal Points

16. Programming: What kinds of nongame/event programming commitments can you offer/obtain through a rights negotiation? How can these be valued?

17. Downside protection: What insurance is important to you in a new deal? Reopeners? Resets? Extension options? Material change? Programming prioritization? Most favored nation clauses? Assignment limits?

18. Grant of rights: What elements should you include and reserve in your rights agreement? What scope will a third party insist upon? How can you increase the value of your rights package, while protecting future opportunities? How will you ensure that you will retain the new technology and multimedia assets needed to properly promote sales, sponsorship, and run your business in the future?

19. Term/back-end rights: What length deal term should you consider? When should you go long or short? What back-end rights are optimal/acceptable to you?

20. Other nonfinancial terms: What other benefits are provided by your current agreement? What is lacking? What tactics increase the likelihood your arrangement will be successful?

Media negotiations are not just about a number. Having solid, fully considered answers to these questions, sets up a successful outcome. A wise enterprise will take significant time in advance to work through these and other questions, and be properly educated prior to entering the marketplace. Doing so will help level the playing field. Only then can you expect the ultimate outcome to propel your business and enhance your brand.

Ed Desser is president of Desser Sports Media (, specializing in sports media rights negotiations, strategic planning, rights and asset valuations, mergers and acquisitions, and expert witness consulting. Desser has negotiated or advised on over $40 billion in sports media rights and transactions.