How Much Money Do Television Networks Make Off Of Ncaa Sports
Television Lavishes Coin On Sports, only Does It Pay?
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December 3, 1989
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Belatedly last week, in announcing a new contract with the National Basketball Clan, Terence F. McGuirk of Turner Network Television receiver fabricated two statements that at first seemed contradictory.
First, he said the Turner network was happy to pay the league $275 million over four seasons, virtually three times the rate information technology now pays to the Northward.B.A.
And then, McGuirk said that at that toll, the Due north.B.A. would probably not be profitable for his network from an advertisement standpoint.
Why would the president of Turner Sports exist so happy to plan an expensive television receiver series like pro basketball game on a fledgling cablevision network, with the possibility that it could lose money? And why are other television companies doing the aforementioned?
Is it prudent for CBS to pay nearly $1.i billion for iv years of major league baseball? Tin can NBC brand money while paying the N.B.A. $600 million for four years? Why does CBS think the National Collegiate Athletic Association basketball tournament is worth $1 billion for seven years?
The reply is as simple as Economics 101. ''Supply and demand,'' McGuirk said, along with a fear that the competition might outbid you lot.
In some respects, the Turner-Due north.B.A. bargain is representative of what is taking place at many levels in the television sports manufacture. Big league sports provide prestige and broad-based appeal in a growing but increasingly diverse marketplace. Many in the television industry think that, in changing and uncertain times, sports programming is a safe bet to draw undecayed ratings.
As a upshot, networks and cable companies are willing participants in an increasingly expensive and competitive sports-programming marketplace.
''In that location is nevertheless an insatiable ambition for sports,'' said William Sherman, vice president and supervisor of national broadcasting for McCann-Erickson, which buys commercial time for advertisers on national network sports telecasts. ''Sports has a lot of magic to it. It is live, unrehearsed and dramatic.''
Advertisers similar sports, Sherman said, because sports delivers a ''male person-target'' audition with loftier efficiency.
In the case of Turner and other cablevision networks, sports, in addition to luring advertisers, also increases the network's attractiveness. The Northward.B.A. arrangement, TNT thinks, volition encourage cable systems to include information technology among their limited number of channels. Cable operators must pay TNT for its programming. Networks such as ABC, NBC and CBS do non have that source of coin.
''We take a dual acquirement stream, which changes our economics quite considerably,'' McGuirk said. ''We evaluated where TNT was going and how pregnant the N.B.A. has become. This bundle is worth this much to u.s.. This package profoundly enhances the attractiveness of TNT.''
Yet even with revenue from cablevision systems, TNT is not assured of a profit. ''Nosotros are hoping for the best,'' McGuirk said. As is often the instance in business concern, timing is important, and it has played a part in the contempo up screw in contract values.
''A number of sports properties have come up in a short catamenia of time,'' said Dick Schultz, executive director of the N.C.A.A. This, he said, has heightened the competitive instincts of the networks.
''I take to take them at their give-and-take,'' Schultz said. ''I can't believe the networks would make these commitments if they couldn't make a profit. Time volition tell.''
The contract agreements of the concluding yr have been near as newsworthy every bit the championship games of the respective leagues. You tin't tell the networks without a scorecard, and it helps to bring along a figurer instead of a pencil.
Concluding December, when CBS caused major league baseball for four years for nearly $ane.1 billion, it paid virtually as much money as NBC and ABC, combined, had paid for the previous half dozen. In addition, ESPN is paying baseball $400 million for 4 years of games.
Early concluding month, when NBC bought the N.B.A.'south over-the-air (noncable) rights for iv years, the $600 million it paid was more than three times the $176 meg that CBS had paid for the previous four years.
Afterward last month, CBS bought Schultz'southward N.C.A.A. basketball tournament, along with a few other higher sports events of lesser stature, for $ane billion, an average price of almost $143 million a year, upward from the $55.3 million it had been paying.
The biggest shoe, one with cleats, may be adjacent to driblet.
In the next few months, officials of the National Football League will see with their counterparts from the major and minor goggle box networks to negotiate new contracts worth millions or billions of dollars.
For the last 3 decades, the N.F.50. has been the overall pacesetter for the business organization of sports television, oftentimes years alee of other sports and other programming in terms of acquirement and exposure.
''The Northward.F.L. is the gold standard in television entertainment programming,'' says Roger 50. Werner, president and chief executive officer for ESPN, the cable network that shows pro football games on Dominicus night. ''It is as practiced equally anything you can perchance program.''
Perhaps. But when the Northward.F.L. last sold its television rights, before the 1987 season, it accustomed a modest increment, raising the acquirement from an average of about $15 million per club per year to about $17 one thousand thousand. To get even this pocket-size increment, the N.F.L. allowed ESPN cablevision to join the party while it lowered its rates with CBS, NBC and ABC.
This time effectually, will the N.F.Fifty. seek rights increases in proportion to those enjoyed past its fellow big leagues? ''That kind of reasoning is dangerous,'' said Kenneth D. Schanzer, executive vice president for NBC Sports. ''They are going to want an increment, merely they are exceptionally practiced businessmen who realize that there is a value to them in the health of their partners.''
Val Pinchbeck, director of broadcasting for the N.F.L., said he had no comment on the coming negotiations. Jim Heffernan, the league's public relations director, said the new commissioner, Paul Tagliabue, would give no interviews on the matter.
When the terminal agreement was negotiated, the three major networks said they were losing millions of dollars on pro football game.
''Last time, we did negotiate in a very soft market,'' said Jerry Jones, the possessor of the Dallas Cowboys. ''This time, I would certainly expect an increase. I'thou not going to give you a specific number, but I do recall information technology volition be significant.''
Can network sports divisions brand a profit later on paying large rights increases?
This question is often raised, peculiarly in regard to CBS, which is using sports programming as the centerpiece in its attempt to rise from third place in the overall network standings.
The deal for baseball, some say, is guaranteed to lose coin.
''How tin they maybe make coin?'' asked Sherman, the advertising executive from McCann-Erickson. ''The answer is they can't.''
Schanzer of NBC Sports said CBS would ''have to defend the baseball deal, which is indefensible.''
''It cannot exist defended in fiscal terms,'' Schanzer said. ''It is a money-loser of profound dimensions.''
Neal Pilson, president of CBS Sports, has countered these arguments for months, arguing that CBS tin use postal service-flavor playoff and Globe Series telecasts to promote its prime-fourth dimension amusement programming and please local affiliates concerned about the overall ratings slump at his network.
He says sports, including baseball, the higher basketball tournament, and the Winter Olympics of 1992 and 1994, are ''function of a much larger corporate strategy, a larger mosaic to recapture the No. one position in prime time. We will utilize sports equally a weapon to do that.''
In some respects, the CBS strategy is like to that of ABC, which rose from last to first in the 1960's and 1970'southward with a sports-oriented arroyo.
Back and then, rights cost less. Volition the high-priced sports programming of the 1990'due south make money for CBS?
''I don't think that'south the relevant question, making or losing a dollar,'' Pilson said. He added, however, that the college basketball game tournament and the Winter Olympics should exist assisting and that his network was merely following the demands of the marketplace.
''What TV is doing is reflecting the taste and appetite of the American public,'' Pilson said. ''Nosotros Nielsen it every 15 minutes. The love matter the American public has with sports is simply beingness mirrored.''
Certainly the exposure of sports is growing, traceable in part to the proliferation of cablevision in the 1980'southward.
Final month, Werner of ESPN testified earlier the antitrust, monopolies and business rights subcommittee of the Senate Judiciary Committee, which was concerned that some events formerly seen on free television were moving to cable.
Werner brought with him tables of figures - not including the Olympics - that showed increases on both gratuitous, over-the-air television and on cable, with the more dramatic increases coming on cable. But what else hath cablevision wrought? The Senate committee expressed concern about some programming, such as Yankees baseball in New York and some Big X football games in the Eye West, that has been sold to cable when it used to appear over the air.
''There is evidence to suggest that we may be at a turning point,'' wrote Senator Howard M. Metzenbaum, the Ohio Democrat who is chairman of the committee. ''George Steinbrenner'south decision to give a cablevision network sectional rights to all Yankee games starting in 1991 displays an arrogance adjoining on antipathy.''
Bryan Burns, senior vice president for major league baseball, responds that there was more baseball on local, over-the-air television concluding season (1,653 games) than there was in 1984 (i,485 games).
''I'd prefer at this indicate to deal in fact and not perception,'' Burns said.
However, after a negative public reaction to the announcement that CBS would bear witness just 12 regular-flavour baseball game games next season, the network and baseball game executives agreed to raise the full to sixteen.
Available in more than half of American homes with television, cablevision has helped fragment the viewing audience. Along with the use of video-cassette recorders, cablevision has reduced the share of audience attracted by the major networks, and has reduced overall ratings for major sports events.
Curiously, some in the business say this fragmenting makes big-ticket sports events even more than valuable.
''The audition is splintered, just live sports gets the audience,'' said Michael Weisman, formerly the executive producer for NBC Sports, who recently moved to CBS every bit an entertainment producer. ''Advertisers know they can reach males ages 18 through 35. . . . ''In some cases, contracts that announced to be overpriced turn out to exist a bargain.''
Weisman said the ascent rates for rights were a abiding in the business organisation, every bit were paper stories that analyzed them with alarm.
''It's archetype,'' he said. ''When NBC bought the Moscow Olympic games for $80 million, everyone said, 'Are y'all out of your mind?' They sold out the Super Bowl ads at, what, a million-two or a million-3 a spot? Remember when it was $500,000?
''People who make these bids are very sophisticated in the ways of business concern. The nickel candy bar now costs 65 cents.''
Others are not as sanguine. ''We are being squeezed,'' said Werner of ESPN. ''It volition be very hard to make money at the prices being paid.''
Don Ohlmeyer, who preceded Weisman at NBC and is at present chairman of Ohlmeyer Communications in Los Angeles, said that ''this final circular of negotiations has some astringent implications for the future.''
''In the adjacent decade,'' Ohlmeyer said, ''you lot will come across the whole business alter dramatically. The rights fees may go and so large that one of the networks will start their own league or accept an equity interest in a new league. The easiest to start would be professional person basketball game.
''Yous are now at the outer limits of what the advertisers can afford. People are quick to jump to conclusions, but I'g non sure everyone knows what the hereafter will bring. It'due south similar the atmospheric condition: stick around and it volition alter.''
Source: https://www.nytimes.com/1989/12/03/sports/television-lavishes-money-on-sports-but-does-it-pay.html
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