NEW YORK — The cost of sports on broadcast and cable TV has spun out of control, slamming the networks with billions of dollars of projected losses over the next four years.
That gloomy forecast was the main conclusion of a 92-page report put together by Morgan Stanley, which said that the networks have vastly overpaid for the rights to games of all four major professional sports leagues.
Calling the deficits “staggering,” Rich Bilotti, media analyst for Morgan Stanley, said football will take the biggest bite: ABC, CBS and Fox and ESPN will shoulder a combined loss of $2.9 billion on their eight-year (1998-2005) NFL contract.
The second biggest hit will affect ABC and ESPN, which, according to Bilotti’s prediction, will drop a combined $2.2 billion on their recently signed contract for a share of NBA games for the next six years.
Even NBC, which after this NBA season will not broadcast any games of the NBA, NFL, Major League Baseball or NHL, will end up dropping about $351 million over the next four years.
The networks dispute the premise of Bilotti’s analysis, claiming many sports telecasts serve as invaluable promotional vehicles for primetime series and shows in other dayparts.
Large numbers of young men, who typically don’t watch lots of television, will see promo spots within a sports event and gravitate to an entertainment series they might not otherwise have noticed, the webs say. For example, CBS believes promos on NFL games for hit series like “CSI,” “Survivor” and “Everybody Loves Raymond” have helped the network lower the average age of its viewers.
Since Madison Avenue pays a premium for young adults, CBS can charge higher rates for these entertainment shows, a dollar figure that’s not quantifiable, but that Bilotti ignores in his report.
Not every sports buy loses money, Bilotti said. ABC, CBS and NBC will see some profits from college football, and NBC could pocket $65 million from its coverage of the 2004 Summer Olympic Games in Athens.
(Bloomberg News contributed to this report.)