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Volume 23 No. 13
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Early money keys NCAA’s new TV deal

CBS, Turner will pay before 2025 start date

A chunk of the NCAA’s $8.8 billion extension with CBS and Turner will be paid early, before the new terms actually take effect in 2025.

The NCAA and its media partners, CBS and Turner, last week announced an eight-year extension to their original 14-year, $10.8 billion deal, which goes through the 2024 men’s basketball tournament. As part of the new agreement, which extends to 2032, the NCAA will have early access to roughly $400 million of the revenue from the extension, industry sources said.

The reason: The NCAA’s current deal has substantial built-in increases, going from $740 million this year to $761 million in 2017, $782 million in 2018, $804 million in 2019 and $827 million in 2020. But those increases flatten to zero from 2021 to 2024.

The NCAA negotiated for more money from CBS and Turner to build up the annual increases during those years, and it will have the flexibility to take the upfront money as early as 2021 or spread it out from 2021 through 2024, sources said. The NCAA’s board of governors will make that decision on how and when to access the additional revenue.

Annual increases are important to the NCAA’s schools, especially those outside of the power five conferences. The schools in the lower reaches of Division I, and Divisions II and III, rely heavily on that annual revenue from the NCAA to grow their own budgets.

More than 90 percent of the revenue from the Turner/CBS contract goes back to NCAA member schools.

“When people think about the NCAA, they usually think about the big schools, but this revenue stream for many, many of our schools is the dominant revenue stream for them,” NCAA President Mark Emmert said. “It literally allows them to operate. Having that security and growth is really essential for them.

“We have 90 championships, but only one — basketball — generates virtually all of the revenue that comes into the association and goes back out to the schools.”

Turner and CBS, the joint rights holders of the men’s basketball tournament for the last six years, came to the NCAA in October with a proposal to extend their contract to 2032.

While the three sides agreed to basic terms in December, they continued to review the deal to make sure CBS and Turner would own the NCAA tournament rights on whatever distribution platform that might exist well into the future. They also haggled over the amount of money the NCAA could access early and how that would be structured.

Emmert credited the NCAA’s Mark Lewis, executive vice president for championships and alliances, and Dan Gavitt, vice president of men’s basketball, for directing much of the negotiations on the NCAA side.

Media consultant Chris Brearton from Latham & Watkins worked closely with the NCAA during the negotiations. His experience includes representing the International Olympic Committee on its negotiations to construct a long-term deal with NBC. The NCAA also called on Wasserman media adviser Dean Jordan, who has worked with several conferences and properties, including the College Football Playoff.

The rights in the deal remain the same — TV, digital and marketing/sponsorship for the men’s basketball tournament. Turner and CBS also will maintain the same shared financial and programming structure as they’ve had for the first six years of the deal. Turner pays close to 70 percent of the rights fee.

“The NCAA tournament has exceeded all of our expectations on every metric,” Turner President David Levy said. “We’re way ahead of where we thought we’d be six years ago, and that’s why we wanted to get this done.”

The Turner-CBS talks were completed in Houston at the Final Four April 2-4 and the deal was signed soon after, despite historically low TV ratings for the three games on Turner. It marked the first time the championship game had been on cable TV.

The dramatic April 4 final between Villanova and North Carolina on Turner pulled a 10.6 rating, or 17.75 million viewers, across TBS, TNT and truTV, down 34 percent from last year’s 16.0 rating for Duke-Wisconsin on CBS.

But Turner, which manages the tournament’s streaming rights through March Madness Live, remains bullish on the growth of its digital and overall audience. MML generated a record 18.1 million hours of live viewing for the tournament across more than 10 digital platforms.

Despite the TV ratings, both Levy and CBS Sports Chairman Sean McManus said that this year’s March Madness generated the most revenue during the time they have shared the NCAA’s rights, and that it was profitable.

The terms of extension are intended to keep it profitable.

“We weren’t going to do a deal unless it was financially responsible and profitable. This is,” McManus said. Levy added: “It certainly is profitable.”

Both sides said that CBS will have all three games in the Final Four in 2017, while Turner will have the Final Four in 2018, and they’ll continue to alternate through the contract. But they have left open the possibility of changing which network carries the championship game.

The sides said they did not discuss expanding the 68-team tournament field, although there are contractual provisions in the current deal and the extension that address tournament expansion.