With a $6 billion price tag to pay over the next 11 years for a rights package to 22 National Collegiate Athletic Association sports, CBS has embarked on an ambitious program to get blue-chip advertisers to buy into a two-pronged strategy of marketing sponsorships and on-air advertising.
It's not unlike the way NBC is selling the Olympics except that, in the case of the NCAA-CBS deal, it's the first time that a broadcaster has held both the marketing and media rights to a major event.
After a year of pursuing deals, the network has closed a handful of deals with big advertisers—notably, Cingular Wireless, General Motors, Kraft and Monster.com—that have committed to multi-year marketing and ad buys valued in the hundreds of millions of dollars. That's above and beyond the $500 million, 11-year agreement that Coca-Cola Co. signed a few months back.
Under its agreement with the NCAA, CBS can negotiate up to 20 corporate-sponsorship deals annually. With five done so far, the network still has lots of leeway, and others are in the works.
There are two levels of marketing sponsor: "Corporate Champion," like Coke, GM and Cingular, and "Corporate Partner," which involves a smaller but still substantial ($7 million-plus) commitment.
And, while the marketing sponsorships are exclusive, only one of the on-air–advertiser categories is. That belongs to GM, which stepped up with a preemptive offer to acquire the exclusive domestic auto category back in 1991. There are imported autos in the tournament, including Mercedes. Other big advertisers include Microsoft, Intel, Anheuser-Busch, Miller and UPS.
The tourney is sold in packages, and buyers report that the minimum amount to guarantee time in the Final Four contests is between $3.5 million and $4 million. It'll cost $6 million-plus in total expenditures to get a spot in the big game.
Ad sales for the NCAA men's basketball tournament, the crown jewel among the NCAA's TV properties, is more than 90% sold at rates said to be 10%-11% above last year's March Madness pace. Total ad dollars will reach $400 million vs. $355 million a year ago.
The pace of sales has also been much brisker this year. At this time a year ago, the network was only about 65%-70% sold. But Tom Decabia, executive vice president, PHD, notes that the entire TV-advertising market is better now than it was a year ago. "All segments are benefiting, including sports," he says. "There's a trickle down-effect."
Decabia calls the tournament "the premier sports event in March: If you're a sports advertiser, you have to have it."
CBS officials say it's too early to tell whether the NCAA package will achieve profitability in year one. But it should be close, with $400 million in ad sales and another $100 million (so far) in marketing fees pledged by the corporate sponsors. This year's tournament starts March 20.
CBS's NCAA rights fee averages $545 million a year, a little more than double what it had been paying under the previous contract. With the men's basketball tourney pulling in $400 million in ad time, CBS expects to generate the rest of the rights fee with the marketing sponsorships and ad sales for several other televised NCAA events, including women's gymnastics and men's and women's track and field.
CBS is even talking to ESPN, which holds a smaller NCAA TV-rights-only package for such as events as the World Series of College Baseball. CBS hopes to broker deals through which corporate sponsors would advertise on ESPN. The Eye net would get a fee but, as important, would get added protection for the sponsors from ambush marketers.
Chris Simko, senior vice president sports sales and marketing, at CBS won't confirm the numbers. But he notes that there are some costs associated with the marketing deals, "so it's not as simple as adding column A [ad sales] with column B [corporate marketing spending] to get to column C [profit/loss]."
And CBS officials note that $545 million is the average annual rights fee paid to the NCAA under the new deal but not necessarily the exact fee paid each year. "There are lots of moving parts to it," says Simko, "but we are pleased with where we are in year one."