CBS' dream season turned to nightmare on W. 52nd St.

February 24, 1991|By Kevin B. Blackistone | Kevin B. Blackistone,Dallas Morning News

When CBS Inc. started an unprecedented spending spree for sports programs 2 1/2 years ago, it was a broadcasters' market. More fans were tuning in. More advertisers were paying the highest prices for commercial time. And the economy was rolling along.

So, CBS had no qualms about paying $243 million for the 1992 Winter Olympics, $300 million for the 1994 Winter Olympics, $1 billion for the college basketball tournament and another $1 billion for major league baseball. The competition followed.

But now the game has changed.

Today, sports viewership is stagnant, advertisers are cautious and the economy is rolling backward.

As a result, CBS is stuck with more than $3 billion in sports programming that it bought since May 1988 -- more than any other network -- that it is finding difficult to sell to advertisers.

"CBS paid too much, and advertising prices have come down," said Jane Grant, an analyst at Moody's Investors Service, a major brokerage in New York. "Now, they're thinking, 'How can we get out of this situation?'"

Not easily -- if at all.

CBS' problems are symptomatic of what now is a glutted marketplace for sports programs and an oversupply of commercial spots for them. There is more commercial inventory in sports programs than there are advertising dollars to fill it. Every network is suffering the consequences:

* Capital Cities-ABC Inc. last year reported profit declines in the third and fourth quarters overall and significant losses on major league baseball games it showed on its all-sports cable television network, ESPN.

* Turner Broadcasting System Inc. last year lost at least $34 million on the telecast of its Goodwill Games from Seattle during the summer and recorded additional losses on the first year of its four-year NFL contract.

* General Electric Co. does not report separately on the performance of its broadcasting subsidiary, NBC, but the network is believed to have recorded a profit decline last year in part because of losses incurred from its NFL package.

* Sports News Network, an all-sports news cable television network that imitated Turner's Cable News Network, kicked off its broadcast last spring, but lasted only until mid-December.

But CBS, which has the biggest sports calender -- it dubbed 1990 its "Dream Season" -- is hurting the most. The network acknowledges losing $55 million last year on the first year of its four-year, $1 billion baseball package, but most analysts place its loss closer to $100 million.

The loss was so heavy that CBS asked Major League Baseball to pitch in financial relief, including a rebate. Baseball answered "no."

"The extra inventory has been difficult to absorb," admitted Jay Rosenstein, vice president for programming at CBS Sports. "These rights agreements were made at a time when the economy was much better. There are certain unknowns that have become as important as factors as the additional inventory."

Analysts have projected 1991 will be no better than 1990 for any of the networks.

"There is simply too much sports around," said a financial consultant to CBS, who requested anonymity. "Expenses are rising, and demand is not. It is not a healthy environment for any network."


Certainly, neither CBS nor any other network foresaw such gloom a few years ago when they began paying sports organizations exorbitant rights fees to televise various games and events. New multiyear contracts they entered during the past 33 months to televise the NFL, NBA, baseball and college football and basketball totaled $7.4 billion, up 131 percent over previous deals.

CBS was the most aggressive buyer during this spree, accounting for nearly half the networks' spending.

Its actions sent shock waves through the broadcast industry. In the midst of CBS' buying binge, former NBC Sports president Arthur Watson was quoted as saying, "They've got to be out of their minds."

In fact, CBS was following a strategy all networks had used for many years. It just was doing so with more gusto.

Standing third in the prime-time ratings, CBS hoped to increase its prime-time audience with the lure of sports. Sports shows, broadcasters have long believed, provide a quick way to attract viewers and hook them on prime-time programming. ABC was the first to prove the theory in 1976, when it aired the Winter Olympics. The next season, it jumped from last to first in the ratings.

But the fact of this theory is it has failed more often than it has worked. Nonetheless, CBS was undeterred.

Furthermore, the network gambled it could never have too much commercial time on sports programs. Advertisers always are eager to reach males, and sports are their best vehicle to reach that segment.

In 1990, CBS aired more than half of all the sports programming on network television. It became the first network to show the Super Bowl, World Series and NBA Finals in the same calendar year. It also televised the NCAA Final Four, the Masters golf tournament, the U.S. Open tennis tournament and the Daytona 500 stock car race.

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