Sports on the Rocks - Broadcasting & Cable

Sports on the Rocks

High rights fees threaten a long, happy relationship with TV
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My Uncle Bob used to tell great stories about the big games he saw in the 1930s, bundled up against the gray Pittsburgh falls in the bleacher seats of old Pitt Stadium. It was Pitt against Notre Dame or one of its cross-town rivals, Carnegie Tech or Duquesne. All were then national powers. I forget the details of his stories, but recall that they always seemed to also involve his ticket-scalping operation.

I too have great sports memories. The difference is that, in my stories, I'm usually sitting more comfortably, on a sofa in front of a TV set. My TV sports high was Franco Harris's Immaculate Reception in 1972. My brothers and I jumped around our basement as if we were in Three Rivers. The low came in 1992, when the Pirates blew their last, best chance for a pennant, giving up three runs to the Braves in the bottom of the ninth in Game 7 of the NLCS. I was actually at work, in a conference room that night. When Sid Bream scored the winning run, I threw a chair across the room at the TV set.

I don't have to tell you: TV and sports have been a winning combination since the 1950s. Both have benefited enormously from the partnership.

But something is seriously out of whack now. Sports aren't working for TV the way they used to (ratings are down for most), and they're poisoning the relationship between networks and their affiliates.

In cable, Disney's Bob Iger and Cox Communications' Jim Robbins have spent the last several months trashing each other—in private and in public—because Iger needs more dough to pay ESPN's sports-rights bills. Robbins thinks he is already contributing too much and is sick of passing on ESPN license-fee hikes to all of his subscribers.

This is not just a matter of intramural bickering. Because of out-of-control sports rights, Congress is once again thinking seriously about regulating the cable business so that those subscribers who don't share my passion for TV sports don't have to pay for it.

There are many sources of the friction between broadcast networks and their affiliates. Sports may be chief among them. First, the networks cut off compensation—annual payments for carriage of network programming—to most of its affiliates. Now the networks are demanding that the affiliates help subsidize the sports-rights deals.

The latest example is on our front page this week. CBS wants its affiliates to cough up $15 million or so each year to offset the cost of the NCAA basketball tournament. The affiliates will probably do the deal, but they won't like it, no matter how often CBS reminds them how intoxicating March Madness is. To the affiliates, it's simply reverse compensation.

All the networks are guilty. NBC has put the touch on its affiliates for the Olympics. Fox and ABC are getting kickbacks to cover pro-football costs. I don't see the end of it.

For a handy and timely example, look at Manny Ramirez, the slugger who failed to lead the Boston Red Sox to the promised land last month and who, for purposes of this column, represents all players who make ungodly amounts of money. (Ramirez is making about $20 million a year, an amount so out of line with his talent and attitude that the Red Sox are now desperately trying to dump his contract.)

Ramirez and his peers get these ridiculous contracts only because the teams have big piles of money from the selling of their TV rights.

So the problem is not Ramirez. The problem is that, every time one of the big sports contracts comes up for bid, the Big Five media companies insist they won't get sucked into a bidding war. And then get sucked into a media war. Every time, the price goes up significantly. NBC has tried to resist and passed on several contracts but this year probably ended up paying too much to extend its Olympics franchise.

I could be wrong, but I have to believe that rights fees have peaked and that Ramirez's contract will stand as a high-water mark of some sort. If the networks go out and overpay again, they might be surprised when broadcast affiliates and cable operators tell them that paying an astronomical fee for sports rights is an offer they, and their public, can
refuse. For everybody's sake, it's about time to turn off the sports money spigot.

Jessell may be reached at hjessell@reedbusiness.com

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