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As Sports Rights Fees Climb, Will Viewers Continue to Play?

Big media is paying hefty sums to run games from the NFL, the NBA and more — all in the hopes of keeping large masses tuning in to their TV screens. But could the gambit instead drive crowds away?

No one believes American television viewers are plotting to turn off football, but the latest big-time sports alliance — the NBA last week renewed deals with Walt Disney’s ESPN and Time Warner’s Turner for what some believe to be as much as $24 billion over nine years — has spurred armchair economists to fret over whether consumers’ wallets can accommodate the rising programming fees that cable and satellite distributors will eventually have to pass on to subscribers.

“Access to sports will come at a higher and higher price,” said Lawrence Wenner, a professor at Loyola Marymount U., who studies sports management and sociology. “That’s unfortunate, (since) many fans seem to think they have a ‘bill of rights’ to free sports through television. “But certainly there is no constitutional guarantee to sports. And big-time sports have long been big business, and governed by the logic of marketplace forces.”

That was quite apparent when Turner and Walt Disney agreed to pony up what looks to be about three times what they were paying for NBA games. Estimates from Morgan Stanley analyst Ben Swinburne have Turner paying the NBA around $1.26 billion a year, and Disney forking over roughly $1.41 billion per annum, turning what was once a combined fee of about $930 million a year to approximately $2.7 billion.

The cost of rights for other sports has similarly skyrocketed. Swinburne sees CBS and Turner each paying $386 million a year for NCAA March Madness games; Fox paying $1.1 billion annually for pro football; and NBC paying $200 million each year for rights to the NHL, a ratings laggard that’s starting to command bigger bucks.

To some degree, the media companies are helpless. With the advent of new sports networks from CBS, NBCUniversal and 21st Century Fox, the law of the land is plain: If you won’t pay the prices the leagues seek, they’ll find somebody who will. “There is a short amount of supply of premium, live sports programming out there, and with short supply, there is high demand,” said David Levy, president of Turner Broadcasting System. “There are a lot of people who want this content.”

Media companies argue they’re getting more for their money by baking the future into their deals. Levy feels Turner gets fair value from the NBA by expanding digital rights and securing new chances for sponsorships around league events. ESPN will work with the NBA to create broadband distribution.

TV execs’ desire for sports appears unlikely to wane. Few TV properties other than NFL football games can knit together the giant auds that once flocked to everything on the tube, from “The Love Boat” to “Mannix,” in a universe with fewer channels. More important, perhaps: Audiences can’t skip past ads when they watch live — the kind of viewing sports engenders. And with streaming-video competitors waiting in the wings, media companies can’t allow such content to be snapped up by rivals. Yet if subscription prices grow too high, consumers may flee.

Indeed, the game has just begun.

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