TV coverage of about every game played in U.S. professional sports is now available to the rabid sports fan, but there’s a catch: He has to own a satellite dish.
And that’s what’s driving cable operators crazy. The government prevents cable systems from making exclusive deals with USA, CNN, ESPN or any other cable network.
So all of these networks are also part of the programming menu of direct-broadcast-satellite distributors, most notably DirecTV, which offers 150 channels to dish owners and represents potentially serious competition to cable down the road.
By contrast, DirecTV suffers from no such constraints in securing the rights to out-of-market games of the four most prominent professional sports operations: the National Football League, Major League Baseball, National Basketball Assn. and National Hockey League.
And cable subscribers who decide not to lay out the $700 minimum it costs to buy and install a DirecTV satellite dish will have to do without access to any of these out-of-market contests – at least for the next three years.
These exclusive games give DBS companies “a decided advantage” over cable operators, says Dan Brenner, VP for law and regulatory policy for the National Cable TV Assn. “Congress is putting its thumb on the scales,” he adds, by denying exclusivity to cable operators while granting it to DBS distribs.
Speaking for a number of cable operators, Dick Aurelio, president of the Time Warner New York City Cable Group, the biggest cable system in the country, says, “I’d love to be able to offer these NFL games because they’re very attractive to sports fans. DBS has an edge here, and I think it’s terribly unfair to me as a cable operator.”
Various industry sources say there are at least three reasons why professional sports leagues have deprived cable of their out-of-market games:
* The broadcast networks have put their collective foot down, claiming that if the cable universe of 64 million homes could tune out of a national sports telecast and log into a competing out-of-market game, the Nielsen ratings might fall off so drastically that advertisers would lose interest in supporting network coverage. In that equation, DirecTV, which reaches only about 700,000 homes with dishes, is not even a blip on the networks’ radar screen.
* Most cable systems don’t have anywhere near the channel capacity to offer simultaneous feeds of 14 Major League Baseball games on a busy night, or 13 NFL games on a Sunday afternoon. The average cable system offers only three pay-perview channels, so at best it would have to cherry pick, frustrating subscribers who might disagree with the system’s choices.
* Many cable operators, although they’re eager to experiment with out-of-market games, are not convinced that the games will funnel significant revenue into the systems’ ledger books. Most cable systems already provide lots of games through the local broadcast network affiliate, the national cable outlet for the pro leagues (ESPN for baseball, football and hockey, TNT for basketball and football and TBS for basketball), the TV station that has the rights to games locally and regional cable-sports networks.
All of the leagues acknowledge that broadcast network coverage of their games takes precedence over all other forms of distribution. Championship events- the World Series, Super Bowl, NBA Championship Finals and NHL Stanley Cup Finals- are part of the culture and have become increasingly important to broadcast networks seeking to brand themselves with high-visibility programming in a cutthroat media environment overflowing with dozens of cable channels and videocassette recorders in 81% of U.S. households.
The rights fees reflect the broadcast networks’ heavy dependence on pro sports. For example, the Fox Network is paying $1.58 billion for four years of NFL weekend games, ABC is laying out $920 million for “Monday Night Football” (1994-97) and NBC is ponying up $868 million for a four-year package of weekend AFC games.
NBC is giving the NBA $750 million for four years of basketball, including primetime coverage of all of the Championship Final games. Even hockey, whose limited viewer appeal kept it off the broadcast networks throughout the 1980s and early 1990s, got a new lease on life last year when Fox agreed to shell out $155 million for a four-year contract with the NHL.
Baseball’s revenue-sharing arrangement with ABC and NBC expires this year, but CBS, Fox and ABC itself have all sent out the word that they’re interested in negotiating a deal with the major leagues for 1996 and beyond.
National cable network deals have become a crucial revenue generating supplement to the broadcast contracts engineered by the pro sports leagues. Football is way out in front, harvesting $524 million from ESPN and $496 million from TNT for a shared four-year package of Sunday night games. Further down the food chain, the teams handle rights negotiations with regional-cable-sports networks and TV stations in their local markets.
Transmission of out-of-market games by satellite distributors is still an unknown quantity. Ed Desser, president of NBA TV Ventures, says there are two main customers for these games.
“First is the displaced fan, the guy who moves from Los Angeles to New York and wants to see 50 or 60 Lakers games” instead of the half-dozen or so he might see through potluck in the course of a season on NBC, TNT, TBS, the Madison Square Garden network and Sports channel New York, Desser says. “The second is the huge fan,” he continues, “who wants to spend his leisure time watching as many games as he possibly can.”
Desser’s presumption is that only a small number of people fit into these two categories, which means that “there’ll never be enough rating points to allow us to get advertisers to support” out-of-market games.
With only one source of revenue for these games- the fees paid by dish owners – expectations are that DBS distributors will have to charge high retail prices for these games. DirecTV charges $149 for a full season of all out-of-market baseball and basketball games, $139 for 17 weeks of Sunday football encompassing about 200 games, and $119 for all regular-season hockey games. The industry consensus is that logistical problems make it prohibitive for a company like DirecTV to charge a one-night-only fee for fans not eager to make a commitment for the entire season.
If the skeptical forecasts prove to be wrong and dish owners start gobbling up out-of-market games, cable operators say they’ll be ready to climb into the ring with DirecTV and demand to be included in any future package of these games.
By 1998, when the exclusivity deals with DBS distributors will have expired, analysts are projecting that a majority of cable operators will be doubling and tripling their channel capacity, setting aside a dozen or more channels for pay-perview.
And operators will want to fill them with more than just movies and the occasional prize fight and rock concert.
As Aurelio puts it, “There’ll be no logical reason, and certainly no legal reason, for the leagues to withhold these games from us.”