TV's great slam dunk

Television chiefs in the US and UK are jumping through hoops to pay more for sports rights

By Gerard Wright and Dan Gledhill

By Gerard Wright and Dan Gledhill

05 December 1999

A gentle, professional smirk touched the face of ESPN news reader Dan Patrick as he pretended to read the script in front of him, then looked at the camera. The CBS network, he announced, had won the right to renew its ownership of college basketball television rights for $6bn.

Of course, Patrick had an interest. ESPN is owned by CBS's rival, the ABC network, which was an underbidder for the same rights but came up short by a billion dollars or so. Even had it been delivered in a normal tone with a straight face, the figure Patrick announced was an unprecedented sum for any sports property.

Records are also being shattered on this side of the pond. The rights to broadcast live Premier League football are up for grabs the year after next. Judging by the jostling going on in the tunnel, the next winning bidder will have to pay around twice as much as the £670m BSkyB shelled out last time.

At least BSkyB can argue that the Premier League is the pinnacle of domestic football competition. CBS's deal with the National Collegiate Athletic Association will allow it to cover 63 student fixtures in the 64-team annual tournament. It lasts three weeks. Sometimes, but not often, it yields one of the defining sporting moments of the year. However, even with that possibility, for $545m a year for 11 years you would want a lot of highlights that would entrance a lot of viewers.

That won't happen. The best college players are now leaving after one, two, or three years of their college stint to join the National Basketball Association (NBA). Ratings are down. This year's figures were down by almost 30 per cent from their high point in 1992.

So why pay such money for an apparently diminished product? Two reasons - strategic and economic - says Dean Bonham, a Denver-based sports marketing consultant. "A network, today, must have appropriate programming to compete with satellite and cable," he says.

It needs "signature" events to keep an audience attuned to, or at least aware of, the network's other programmes.

A similar consideration motivated the infant BSkyB to blow its fellow bidders out of the water in its eagerness to acquire Premier League football rights. That high-profile coup has been used as the foundation of BSkyB's assault on the rest of the UK television market.

"CBS will attempt to make a profit on its purchase," Bonham says. "Whether that's possible is a big question."

With its college broadcast rights, CBS also acquired cable, satellite, digital television and home video properties. For the same period, it will also own rights to radio, internet sites, electronic and retail merchandising, marketing, licensing and sponsorship.

These ancillary rights were so attractive that companies like ISL United States, a subsidiary of the Swiss-based sports marketing conglomerate which deals the rights to the World Cup, were prepared to bid for them separately.

The CBS bid continued an association with college basketball which began in 1982, became serious in 1990 when it acquired exclusive rights, and then all-encompassing when it paid the then massive sum of $1.73bn over eight years for those rights in 1994.

It was the size of that expenditure which prompted it to retreat when Rupert Murdoch bid a then unprecedented $1.58 billion over four years for the rights of half of the National Football League (NFL) games for his upstart Fox network.

Murdoch's successful offer had the dual effect of giving his new network some competitive legitimacy (as well as winning over around 20 formerly CBS-affiliated stations across the country) and marginalising what had been the number one network in the country.

CBS learnt its lesson well. In January last year, along with Fox and ABC/ESPN it made a successful bid for NFL rights when they came up for renewal. When totalled, their combined offer was a staggering $17.6bn over eight years.

Sporting events have become the engines of the networks. A Seinfeld or The Simpsons might come along once in a generation and carry the rest of the network along with their own momentum. Sports, from golf to basketball to football, rely on the scheduling of administrators and the skills of the players, rather than some as-yet undefined form of alchemy that transforms a comedy, drama or cartoon series into a hit. Hence the willingness of BSkyB to tie up so much of its investment in a single sporting competition.

The networks like to identify themselves as the owners of, or at least be associated with, certain events. To do so, they will bid pro-actively and hugely, even before TV rights come up for auction. CBS outbid Fox for the college rights by $1bn.

This is why NBC owns the summer and winter Olympic broadcasting rights through to the yet-to-be located Games of 2008. In December 1995, it made the International Olympic Committee a first, last and only offer of $3.15bn to secure its ownership of the US broadcasting rights. It made that offer on the condition that no other network even be contacted, let alone that they be allowed to make a counter-offer.

It is not just size of audience which ensures that US sports rights are far more valuable than British ones. The sheer size of many American media companies means there are that many more bidders around when rights come up for grabs.

But the next round of bids for the Premier League should feature some new additions to rival BSkyB. Assuming that NTL's merger with Cable & Wireless Communications survives the scrutiny of the Competition Commission, the combined cable operator should represent stiff competition. The combination of United News & Media and Carlton, another merger subject to regulatory approval, could also create a group with the firepower to bid up the price of covering British sport.

If all this suggests the winners will end up paying silly money, it is wise to remember just how popular coverage of sports is. In the US last January a leading American commentator noted that only two TV programmes rate better than the last two play-off games of the American Football season.

One of those was the Academy Awards and the other was the Super Bowl.