Bloomberg: Networks Say Broadcasting Sports Is A Loser

I don't even think the networks that show the NFL make money off of it.

 

Not for the coin they spend on it they don't.

They used to expect to see some kind of return in ratings for other programming by promoting them during the sports.

Apparantly the cost is far outweighing the return....even in golf, which has great demographics for business advertising, if Woods isn't playing...even in majors...no one's watching.

 

Like it or not, ratings aren't just about how many, but also who. Advertisers know that some viewers matter a lot, others some, and others not at all. Why do you think that the Oscars get so many ads for women's products? Because that is the only guaranteed huge-ratings event of the year that isn't a sporting event mostly watched by men. Well, when CBS lost the NFL, not only did their gross ratings fall, but their viewership for the whole week (not just Sunday afternoon) got older and more female - exactly the folks who matter the least to most advertisers. I wouldn't hold my breath on advertisers giving up so easily on TV events that will attract males at an impressionable age, and if the advertisers will pay to advertise on a sports show, there will be a sports show for them to spend their advertising dollars on. Fox wasn't considered a big network until it paid what it took to carry the NFC. That's real prestige, not hollow and meaningless stuff. It may very well be that The Mouse overspent on the National Hockey League, but that doesn't prove any generalizations about Big Four networks rushing for the exits to stop showing big games on the weekend afternoons.l

 

El Jefe, et al:

As pointed out here and elsewhere, the cost of the NFL is too much for even the secondary benefits (i.e., drawing viewers to other shows) to outweigh how much is lost in terms of money.

Right now, the best bet for any network is, oddly enough, the AFL deal with NBC (maybe not great for the league, but NBC is already making money--and how many other sports make money on TV? None if you follow this article) or something like MLS that is paying for its broadcast rights so that the network isn't really losing money on it. Otherwise, mucho dinero is being lost on the Big Four (and probably college sports if this article is correct).

Anybody know how good this deal is for the AFL? Are they making money?

 

Belly up apparently, based on what some hockey people are doing.

They're lining up a new WHA to coincidentally start up when the NHL players will probably go on strike.

1.5 mil gets you in, 10 mil salary cap per team, one marquee player is exempt from the cap per team.

On initial markets:
"Howell said the league already has "pretty firm" commitments from franchise owners in Birmingham, Ala., Orlando, Indianapolis, Jacksonville, and Hamilton, Ontario, as well as existing NHL markets Miami, Pittsburgh, Phoenix and Dallas."

This per SBJ.

Worst part of this is that Howell formerly fronted the CFL Rough Riders, well, at least he did until he was indicted on 58 counts of fraud and forgery. He got off, lack of evidence, but I'd say that tends to taint a person.

Doom and gloom quotes from at least one NHL owner too, who thinks that the WHA might be able to succeed, but that it's too late for the NHL to change it's stripes (this from Howard Baldwin, of the Penguins).

 

There's another thread discussing the AFL's ratings, and speculating that the money that NBC was making they are no longer making.

 

Not true. While ad dollars do not cover the cost of the contract, CBS and FOX have successfully used it as a vehicle to promote their primetime schedules. Primetime is where the money is, and even marginal increases in viewership translate into increased ad revenue.

CBS's return from the ratings backwaters corresponds roughly to two things: a night of decent comedies (Mondays) that brought in younger viewers and getting the NFL contract back. While they still skew older than NBC, they're about to lead for a third straight year in total viewership. And that supports their ad rates. The NFL is a huge contributor to that.

 

Isn't this what Kirch Media in Germany went through? Ad revenue is causing a downturn in a lot of salaries...

By the way, I think the reason why ESPN shows extreme sports like skateboarding is that the cost is low to produce and they draw in a lot of teenagers who spend their parents money...

 

But the secondary benefits make it closer than it would otherwise be. Networks are more than willing, as El Jefe justly pointed out, to have that particular loss leader (as opposed to the others) because it has consistently, and most likely will for the forseeable future, continue to deliver guaranteed eyeballs and the prestige of carrying the country's most popular sport. No, that doesn't totally balance the ledger, but it makes it a lot more palatable than, say, the NBA.

And the other side of the coin is that the AFL deal may be making money for both parties (and that is a good thing these days), but it doesn't have many other ancillary benefits - drawing a 1.0 on a Sunday afternoon is okay, I guess, and if you're making money, I guess it's a bit better, but, really, what can you do with it other than that? Are they going to put Sherdrick Bonner on the Tonight Show?

I wouldn't be surprised to see more partnership deals (but you still have to have something to bring to the table if you're the league in question - the AFL brought 16 years of brand equity and a proven fan base, such as it is, and it probably wasn't going to fold overnight like the XFL) and more time-buys, and relatively few rights fees deals. The NBA had to go more towards cable to get a modest rights fee increase. As mentioned, the NHL will be a very interesting test case when their deal is up.

And if you're a league, and you're going to spend bunch of money on something, there are a lot worse ways I can think of to lose it than getting your games on TV.

They said it'd be profitable from Day One, but the effect of ratings being less than projected has yet to be fully explained. When the season is over in a month, I'm sure we'll hear about how much was lost or made.

Oh, and the WHA? Yeah, right. Good luck. This isn't 1972 anymore. There is no shortage of hockey teams. A bunch more undercapitalized guys who have no idea what they're in for, pick a sport to invest in and pin their hopes on people remembering brand equity that died 24 years ago.

They tried that with the ABA. Didn't work. The WHA won't work either (and the guy in charge of the new WHA2 minor league is a total idiot as well, that won't last next season without a couple of franchise shifts and probably at least one or two foldings).

 

I think leaps are being made here. If the secondary benefits of carrying the NFL (i.e., more viewers for other programs) were worth the loss of millions (or hundreds of millions) of dollars, then wouldn't the loss of the NFL hurt a network? Because NBC doesn't seem to have suffered one bit from losing the NFL. One could argue that CBS did, but then again one would have to prove the losing the NFL is what cost CBS those viewers, and I don't think anybody can truly do that. CBS has skewed older for many years now according to newspapers everywhere, even back in their NFL years.

What I'm saying is you cannot prove that losing the NFL cost any network a significant amount to make it worth losing all the money by carrying the NFL. Same with NBA and MLB. Judging from this report, these major network heads seemed to feel that all sports are money losing and probably not worth the huge amounts of money that is lost.

NBC is about making money. As long as they can pull in the bucks, they really won't care what rating AFL does, because there is, in the opinion of the people that matter, no sport out there right now that will make money for them (unless the huge rights fees go down, which they won't for anything but NHL in the near future) if they use it to replace the AFL.

 

I'm going to theorize for a second, so I may sound crazy...

OK, let me rephrase that, I may sound crazier than usual.

Anyways...I think the reason that ratings are just about dreck for sports is because most sports are broadcast on weekend afternoons. Nothing to do with the sport itself, but the only time where one can get those desired demos is weekday primetime. I think that's why MNF pulls in, not great numbers, but decent numbers, enough to justify its continued existence.

Relating this to soccer, MLS would do well to seize the very first opportunity it can broadcast on a network on weekday primetime. A holiday, for instance.

But, you know, what are the odds, huh?

 

Fair enough.

But the fact is, CBS got out of the football business and then fell all over themselves to get back in.

As near as I can tell, as long as the NFL holds its position as the pre-eminent league for popularity and television eyeballs, there will always be networks willing to pay for it.

NBC has made a shareholder-driven corporate decision that their company is better served by not losing tons of money on sports rights fees, and if that begins to help slow down that runaway train, even slightly, that's a good thing. But I'm not sure it's not too soon to tell for sure if NBC believes it's much better off, or if the Olympics and some tennis and golf are okay for them.

Hockey may be the first time someone really begins to believe that the Emperor has no clothes, because it'll be a Big Four sport getting kicked to the curb, with no suitors that I can think of who'll be standing in line to throw money at them.

I think Disney overpaid for the NBA, considering I don't believe there was a lot of competition for the package. I don't know if they'll think it was such a hot deal 3 or 4 years from now.

As for the "as long as the AFL makes even a little money for them, NBC doesn't care about the ratings" thing, that may or may not be true. But I've always been amazed that Hollywood movies that cost $100 million to make are considered failures if they only take in $104 million at the box office. It seems they always want more.

 

While MNF's sheer ratings numbers are smaller (and, in some cases, much smaller) than they were back in the Golden Years of Frank, Don and Howard, their position in the ratings race (since ratings are down across the board) is not worse. MNF will finish this TV season in the Top 10 prime-time network television shows (it's currently 9th) and is ABC's prime time ratings leader (just ahead of The Bachelorette) with an average 11.23 rating. I'd say being the #1 show on the network pretty much justifies its continued existence.

Please don't make us go there again.

So far this season, the networks have cancelled sixteen prime time programs that were getting average ratings above 3.75 and averaging 5.4 million viewers. The absolute lowest-rated prime-time program on a network this season was something named Abby on UPN, and that got 1.76 million viewers. The lowest-rated prime-time program on a real network (not WB or UPN) was ABC's Push, Nevada, which was shown the door after four or five episodes despite drawing an average of almost four million viewers an episode.

MLS cannot even hope to approach those numbers for regular-season weekly telecasts, IMHO. I don't see the evidence to support the contention that they could.

The television business is not about a public trust anymore, it's not about doing a nice thing for nice people who haven't exactly had their way for many years because of big, bad football and baseball and basketball. It's about money and there are millions and millions of dollars and lots of careers to be lost and made in prime-time network programming. They aren't going to take chances with a proven low-rated sports property, even if MLS is buying the time (which MLS couldn't afford to do, not at prime-time rates), no matter how much you or I would like to see it happen.

 

Actually, let me retract/clarify that statement above about CBS. Their situation is different from NBC's in that they didn't make a conscious decision to get out of the football business, their bid was trumped by FOX when no one took FOX seriously, IIRC.

 

Do you have any links to studies that back up your claim?

 

NBC has had a few of things going for it since it lost the NFL contract: 1) A powerhouse lineup on Thursday nights that guaranteed advertisers an obscene number of viewers in the sought-after 18-45 demographic. 2) A higher than others number of shows where they control the production (and therefore the costs) in primetime. 3) A ratings winner in late night. 4) The Olympics, particularly the Salt Lake games. But if Jeff Zucker doesn't deliver a few primetime, non-reality based shows that are successful in the next year, they're toast.

Nobody here is arguing that the NFL alone will make a network's schedule profitable, but it is one very big tool they can use. Certainly CBS would not have been able to get back on top with the NFL alone, they had to have a few hit shows that weren't aimed at the geritol set (thanks, CSI).

It may be that we're near a point of diminishing returns on some of these contracts (NHL and NBA most definately, it would seem), but just because someone says they're not going to pay more for the next contract doesn't mean they're going to pay less.

Finally, I'd put network executives public statements slightly higher than tobacco company executives on the truth scale. Why would they say, in open testimony or interviews, that "Sure, the ad market is great. We're ready to pony up even MORE for existing sports contracts."?? It is a competitive bidding process that is not necessarily driven by factors which they want to share with you and me. NBC did an end run around everyone else the last time the Olympics were in play, for heavens sake.

These guys sell things to us in very large quantities. I'm not ready to take everything they say at face value.

 

1. Considering the time lag between when the money is spent and when it's received, you could do better with a simple, no risk investment, like municipal bonds.
2. If the production costs for the movie is $100M, and the studio produces $2B worth of movies in a year, then that movie ALSO has to cover 5% of all the studio expenses. Even forgetting about my first point, $4M won't do that.

 

Fair enough. Thanks.

 

getting the NFL is what made FOX what it is. Remember that a lot of local stations switched their affiliation to FOX after they got the NFL? They went from a laughing stock, viewed as UPN or WB to being arguably the best television network. In their case, it was very much worth it.

Help spawn other cable channels related to FOX, such as all the Regional Networks, and Fox News. Thank goodness for the NFL.

 

This from Rudy Martzke's column last week: