America's pastime-at least all the really important games-will be brought to you by FOX for the next six years. Last week, the network agreed to pay Major League Baseball $2.5 billion for the rights to all post-season play and regular-season packages for both the FOX broadcasting network and cable through the 2006 season.
With that deal in place, and with the recent acquisition of NASCAR racing and the renewal of the NFL, FOX Sports' "grand plan" is in place, says David Hill, chairman, FOX Sports Television Group. "These three sports are the ones we targeted" back in 1994 when FOX first got into sports, Hill said.
NBC passed on the right to renew for about twice what it is paying under a five-year $475 million contract that expires this season. Both CBS and ABC passed on the opportunity to assume the NBC package.
Affiliates are OK with the new pact, as long as FOX doesn't want them to help pay for it, says Cullie Tarleton, head of the FOX affiliate advisory board. "I told them in front of the [affiliate] board that they shouldn't mortgage the farm, because there would be no affiliate participation." Affiliates, he said, feel they do enough with the NFL contribution and the recent inventory buy-back plan.
Hill declined to comment on any plans (or lack thereof) to ask affiliates to help pay for baseball. "That's an internal matter," he said.
After getting a fourfold increase in rights from ESPN last year for a six-year extension to its regular-season package, Major League Baseball officials were feeling pretty cocky about upcoming talks to renew the national-broadcast packages. They thought they could get NBC and FOX to pay three times what they've paid for the last five years.
After all, that was what the National Hockey League was able to extract from Disney last year for an exclusive pact that puts hockey on ABC and ESPN.
In the end, however, baseball settled for a much smaller increase-just 44% over the next six years. When it asked for a threefold increase several months ago, all the incumbents-Fox, NBC and ESPN (it has a soon-to-expire divisional-playoff package separate from its just-renewed regular-season games)-rejected the price tag.
CBS and ABC also turned down MLB's demand for a threefold rights increase.
Fortunately for MLB, one of the incumbents, FOX, has the right combination of outlets-network, cable and TV stations-to justify a sizable, if not gargantuan, rights increase.
FOX is stepping up nationally to cover a sport that it already dominates locally. Four of Fox's owned-and-operated regional sports networks and six affiliated networks have both the local broadcast and cable rights to 13 Major League Baseball teams. FOX Sports Net, through all of its owned-and-operated networks and eight affiliates, control the cable rights to 27 of the 30 MLB teams.
"In a way, FOX has now adopted baseball," says Neal Pilson, the New York-area-based sports consultant and former president of CBS Sports. "In FOX, they have a full-time broadcast partner, who I think will give baseball a very strong promotional platform."
But Pilson says FOX is "certainly taking some risks" by assuming the entire national-broadcast package. He knows from firsthand experience just what those risks are. He negotiated a baseball package for CBS in 1989 that ended up losing $500 million over its term.
"We ran into some huge problems, not of our own making," he says. "We hit a recession, we had the Gulf War and we had a lockout all in our first year." To top it off, the World Series turned out to be a four-game sweep. "So I wish FOX much better luck than CBS had."
FOX still has to sort out how it will distribute up to two regular-season games a week on cable, with Fx, FOX Family and FOX Sports Net all options. Most of the post-season action will be on the broadcast network. Some division-playoff contests may remain on cable. FOX can also sublet some games to other networks.
Major League Baseball Commissioner Bud Selig said the league believes it will benefit from having one primary rights holder as opposed to the bifurcated arrangement that's existed with FOX and NBC. "Having one partner will bring stability, cross-promotion and a lack of confusion for viewers," Selig said.
The baseball packages for NBC and FOX have been marginally profitable in recent years, sources say. Both Pilson and Hill said that FOX should be able to profit with this next package. "In this day and age, network television is the only place you can get many eyeballs," said Hill. "We think we'll be able to maximize ad rates in the next six years."
Pilson said he believes Fox's package will be profitable, "but not on the high end." But even if FOX were to lose "a dollar," he said, FOX may still make out.
"Running a network is like running a department store in that you're selling a lot of different products," he said. "So if you get people into the store with a product that breaks even or maybe even loses a dollar, but they buy other products, you make a profit on the entire transaction."