Networks lose as recession makes sports time tougher to sell

March 29, 1992|By Stan Isaacs | Stan Isaacs,Newsday

As the recession has changed the dynamics of sports television, football might be moving toward a new arrangement with the networks, but baseball is standing pat.

The networks want some relief from the current deals -- CBS with baseball, all three with the NFL -- that are killing them. Baseball turned down an offer from CBS that would have extended the current contract while providing financial relief to the network. Most NFL owners seem willing to make an adjustment that will help the networks.

Some hard financial figures:

* The NFL earned $3.6 billion from television in the four-year contract that ends after the 1993 season. The networks' share of that is $2.7 billion; the rest is from cable.

Breaking that down, CBS paid $1.06 billion for broadcast rights, ABC $900 million and NBC $752 million. Because of the recession, the networks have not been able to sell out their NFL telecasts and have been taking a beating. CBS is estimated to be losing $100 million, and ABC and NBC about $50 million each on the NFL.

* CBS paid $1.6 billion for the four-year rights to baseball, a contract that ends after 1993. The network reportedly will lose more than $150 million on the deal. The baseball contract was widely criticized in the TV industry and was blamed for an escalation in rights for football and other sports.

When CBS asked Major League Baseball last year to extend the current contract while reducing rights fees over the latter years, the baseball owners refused. A baseball executive said this week, "It is uncomfortable to hear baseball blamed for the economic problems of the networks. CBS made a strategic decision to buy baseball in the hope of promoting itself back to No. 1 in its prime-time ratings. CBS is No. 1 in prime time now, and the World Series this past year helped do that. The seventh game of the World Series delivered a 32.2 rating with a 49 share, the second-highest rating to the Super Bowl of any program.

"The fact that the advertising marketplace went into recession isn't the fault of baseball. If there is to be any change in our TV arrangement, it will have to be worked out in a future deal."

Long negotiations between the NFL and the networks led to the proposal that would extend the contract while reducing the amount of money the networks would pay the teams in the last two years of the deal. The two cable entities are not included in the rebate plan because the NFL does not equate their losses with the networks. When a contract is signed, networks don't contribute the same amount of money each year. In actuality, payments usually escalate over the course of the contract. In this instance, looking at it from the teams' perspective, each NFL team was slated to receive $26 million in 1990, $28 million in 1991, $34 million in 1992 and $41 million in 1993.

Given the down market for advertising, the 1993 payment of $41 million loomed as a killer for the red-inked networks. So a proposal was conceived to reduce the network payments in 1992 and 1993 and extend the contract for two more years at the same reduced rate.

That means the clubs, instead of receiving $41 million each in 1993, would receive $34 million each in 1993 and in the two extended years, 1994 and 1995. (Actually, they would get $32.5 million each from the networks and make the remaining $1.5 million from revenue the league would derive from owners of satellite dishes.)

The original deal also mandated increases in the league schedules. The teams played 16 games with one bye over a 17-week schedule the past two years. They are slated to play those 16 games with two byes over 18 weeks in 1992 and 1993.

The new proposal would cancel that 18th week. The networks don't want it now because in a down market it adds to the glut of advertising inventory on their hands and probably hurts ratings. TV doesn't help itself by having such a blockbuster ratings entity as the Bears idle for two weeks of a season.

The essence of it all is the current economic reality. The networks don't expect the economy to get appreciably better in the next two years. So they hope to reduce their payments now at the price of absorbing two more years of a contract that is still a fairly heavy number. The NFL, long regarded as the bellwether in sports TV, will, if it approves the new deal, show a willingness to help out a vital partner in its long-range scheme of things. And the teams postpone a new negotiation for two years, gambling the economy will pick up by then.

The networks need the deal. So much so they are not talking about it publicly for fear of saying something that will alienate any of the teams not yet convinced they should approve it. The NFL will meet on this proposal Wednesday in Dallas. A three-quarters vote (21 of 28 owners) is needed for approval.

Those most opposed are San Francisco, the two Los Angeles teams, Tampa Bay, Philadelphia and Washington. Three or four teams reportedly are on the fence. Commissioner Paul Tagliabue and owners Art Modell of Cleveland and Tom Benson of New Orleans, heads of key committees, will try to sell the deal to the owners.

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