Sports Nets Score Big

Some good match-ups make it a good year in advertising sales

Baseball came through in the clutch for cable's regional sports networks this past season, powering most of them to strong ad-sales growth even after a poor winter and spring dragged down by the war in Iraq.

Network executives and industry analysts say the regional sports channels should end 2003 with the usual 10%-14% gains in ad revenue, thanks largely to a baseball-driven surge in the late spring, summer and fall. As a result, the sports networks' collective regional ad sales will likely clear the $540 million mark this year, up from an estimated $490 million in 2002.

"My sense is that they've all had a pretty good year," said Kagan World Media Senior Analyst John Mansell, who tracks sales of regional sports networks. "I wouldn't be surprised if their ad-revenue [percentage] increases are in the high single digits or low double digits."

The regional sports players jealously guard their ad-sales numbers. But News Corp., the king of the regional sports world through its ownership of Fox Sports Nets throughout the country, provided a clue in the earnings report for its fiscal first quarter '04. In the report issued earlier this month, News Corp. said its local sports networks enjoyed "double-digit revenue growth" in the three-month period ended Sept. 30, thanks to increased ad sales, higher affiliate fees, and satellite-TV subscriber growth.

"Local regional sports sales have outpaced local ad sales," said Kyle Sherman, executive vice president of national sports sales for Fox Sports Network. "We really get ahead of the marketplace."

Like their counterparts in regional news, the regional sports channels seem to be scoring particularly well with national advertisers this year as they strive to broaden their sponsor mix beyond beer, automotive and financial services.

Sherman said national ad sales at Fox Sports Network, which operates 20 local sports channels and represents four that it doesn't own, are running 24% ahead of last year over the first half of fiscal 2004. The pace is up from 20% for all of fiscal 2003, 18% for 2002 and just 3% for 2001.

"We had an extremely strong baseball season, with a lot of teams in the playoffs and a lot of excitement around baseball," Sherman said. "It's been pretty balanced regionally. Everybody's in the plus range."

As might be expected given the performance of their respective teams, the Fox sports channels in Miami, Chicago and San Francisco led the surge. But Phoenix, Los Angeles and Seattle also did well, even though their teams didn't make the playoffs.

In fact, baseball performed so strongly in the ratings game for the various Fox Sports Nets after early May that the sport wiped out a big ratings drop during the early-spring Iraq war. Despite a collective 19% ratings decline for all of the Fox sports channels during the first five weeks of the season, baseball roared back to generate a 3.8 national rating for the season, even with last year.

In the current quarter, Sherman noted, national sales are rising at an even faster, 30% clip. He credits this largely to the major new advertisers that Fox Sports Network recruited for the NBA and NHL seasons, including Microsoft X-box and Circuit City.

"The LeBron factor is a good one," he added, referring to NBA rookie sensation LeBron James of the usually moribund Cleveland Cavaliers. "I don't have any post-Jordan blues."

Rainbow Sports Networks, another major player in the regional sports arena, has seen similar results with its six regional sports networks in New York, Chicago, Ohio, San Francisco, New England and Florida. (Although most are called Fox Sports Net, Rainbow stills controls them.)

"I think it's been a pretty strong year for regional sports," said Jeff Krolik, senior vice president and general manager of Rainbow's Fox Sports Net Bay Area. Although a few regional channels suffered this year because of unexpectedly poor seasons for their teams, he said, most did fairly well even in a slow TV ad-sales market. "We operate in these micro-climates," he explained. "If our teams do well, our advertising is going to do well. If our teams do poorly, our advertising is going to suffer."

It has certainly been a strong year for Krolik's network, thanks mainly to its carriage of the Oakland A's and the immensely popular San Francisco Giants during the season. With the Giants' ratings soaring in particular, Fox Sports Net Bay Area has racked up a 20% ad sales gain this year, far better than its usual 5%-7% gain.

"Last year, we promised advertisers a 4.5 rating on the Giants, and they got a 6.0," he said. "So you've got some pretty happy advertisers. They're thrilled."

Fox Sports Net Bay Area also has some new advertisers this year, thanks in part to the national ad-sales deals struck by Fox Sports Network on the local channels' behalf. In the most prominent example, the national sales group brought in Bank of America as a prime baseball sponsor for many of the sports channels, including Rainbow's San Francisco network.

As a result of its ratings and advertising surge this year, Fox Sports Net Bay Area is seeking a 10% rate hike for next year's baseball season. Krolik is hopeful of meeting that goal because viewers usually watch live sports with all the commercials, unlike other TV programs that they record to watch later while skipping the ads.

"It's not really a TiVo product," he pointed out. "It's a product that people watch live."

But, as Krolik readily admits, success this year doesn't have much bearing on success next year. In the "micro-climates" of the regional sports world, nearly everything depends on the often widely fluctuating performances of the sports channel's main teams.

"I have a significant amount of revenue riding on Barry Bonds' hamstring or Barry Zito's pulled muscle," Krolik said. "Those things have real impact, and I have little control."