Sports leagues fan out for fee increase

Will nets keep ponying up for NFL contract?

Sports mavens love to boast that live games are TiVo-proof.

Take those 230,000 New Yorkers who crawled out of bed at 5 a.m. to watch the opening game of the baseball season, between the Yankees and Tampa Bay Devil Rays live from Japan on cable TV last Monday.

Swilling down potfuls of coffee, those sleep-deprived fans convinced themselves they’d never be able to keep from accidentally hearing the score if they recorded the game for playback that night after work.

The sports leagues sieze on this kind of viewer dedication to demand ever increasing fees for the rights to carry their games. But will the networks keep ponying up?

The TV-sports consultant Mike Trager says the acid test of whether sports is immune to economic rationality will come with the negotiations between the National Football League and its rights’ holders ESPN, ABC, Fox and CBS over a new contract.

The NFL will have pocketed a monumental $17.6 billion when its current eight-year deal expires after the 2005 season. Bernstein Research estimates that all of the networks are losing money from their pricey NFL contracts; $900 million evaporated from News Corp.’s ledgers due to overpriced football and baseball.

But no other sport comes anywhere near delivering the ratings the NFL does for all its TV partners. ESPN was up 4% in households for a weekly schedule of Sunday night games in 2003, its 7.7 average rating making it the highest-rated series on basic cable.

ABC’s “Monday Night Football” was up 1% to an 11.5 rating in 2003, one of the few bright spots on the network’s primetime schedule. CBS’ Sunday-afternoon contests were flat year to year (but the rating was a still-gaudy 9.6), and Fox’s numbers were down by 4%, to a 10.3 average rating.

The NFL’s crown jewel, the Super Bowl, is the highest-rated program on TV every year. It has averaged better than a 40 rating each year since 1990, when the game (a San Francisco blowout of Denver by 45 points) chalked up a still-not-too-shabby 39 rating.

No one would blame the NFL if it slapped a $20 billion price tag on a new eight-year contract, particularly since there’ll be at least one aggressive new bidder for a piece of the deal: TNT. David Levy, president of Turner Sports, says a package of NFL games would fit TNT’s strategy of buying selective rights to high-profile sports like Nascar races and National Basketball Assn. games.

The NFL would love it if NBC also decided to get into the auction to drive the price up even more. But after a dozen years as the exclusive broadcast-network partner of the NBA, NBC declined to renew its contract with the league three years ago, citing nine-figure losses on the previous NBA deal.

NBC got plaudits from its shareholders for exercising shrewd financial judgment. But last June, NBC agreed to pony up an eye-popping record license fee of $1.18 billion for the rights to the Summer Olympics of 2012.

For the next five Olympic Games, beginning with the Athens Summer Olympics in 2004, NBC will fork over a total of $4.3 billion.

The Peacock will share its coverage of the games with its sister cable networks USA, MSNBC, CNBC and Telemundo, and advertiser demand for those 16 days of high-visibility programming every two years may eventually make NBC look like a genius.

Mark Shapiro, executive VP of programming and production for ESPN, says he’s going to try to hold the line against encroaching demands from the one pro league that is skating on thin ice with viewers.

“I’m expecting significant license-fee decreases” in the new contract from the National Hockey League, Shapiro says. The current ESPN contract with the NHL, which expires with the 2003-04 season (as does the league’s labor agreement with its players), averaged $120 million a year.

But the NHL’s Nielsen ratings have never made it out of the intensive-care unit in the last decade, averaging a pint-sized 0.47 rating season to date on ESPN (although up 4% from the same period in 2002-03) and a 0.23 rating on ESPN2 (flat from a year ago).

Last year, NHL’s regular-season ratings were off by 6.1% in households on ESPN, plunging by 21.4% on ABC, a sibling of ESPN. In men 18 to 34, ESPN was off by 33.3% and ABC down by 25%.

But Shapiro waves off reports the NHL may be too weak to get any license fees at all. In that no-cash scenario, ESPN would force the NHL to sign a contract giving the league a 50% share of any advertising revenues left over after ESPN has deducted the expense of producing the games.

If ESPN tried to hold out for such a deal, a competitor like the Viacom-owned male-oriented Spike TV would be likely to step forward with an offer of at least a modest license fee for NHL games.

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