Sports, TV & Money: An Explosion Without End : After 50 Years, Fees Still Soaring

On May 17, 1939, Columbia played host to Princeton in a baseball double-header at Baker Field in Manhattan. Princeton won both games, knocking Columbia out of contention for the Eastern baseball title.

Although not much was made of it at the time, the second game was significant for another reason: It was the first sporting event ever televised in the United States.

NBC had a single camera perched on a 12-foot-high wooden stand on the third-base side of the diamond. It transmitted picture impulses of the game through a cable to a truck and from there to the 85th floor of the Empire State Building.

From there, the impulses were transmitted by NBC’s experimental station, W2XBS, to viewers at Radio City, Madison Square Garden, a few advertising agencies and the homes of pioneer set owners. At the time, fewer than 400 sets, all of them experimental, existed in the world.

The experiment, which involved a crew of 16, cost NBC $3,000, a good sum in those days.

Bill Stern, the famous radio sportscaster, was the lone announcer. He opened by saying: “I’m not sure what it is we’re doing here, but I certainly hope it turns out well for you people who are watching.”

Stern, without benefit of a monitor, had no idea what was being seen. Actually, strikeouts were about all that the viewers could follow. The players looked like flies, except the outfielders, who couldn’t be seen at all.

Orrin E. Dunlop of the New York Times wrote: “It is difficult to see how this sort of thing can catch the public fancy.”

But three months later, on Aug. 26, 1939, NBC again televised a sporting event, this time a major league game between the Cincinnati Reds and Brooklyn Dodgers at Ebbetts Field, with Red Barber announcing. Dunlop was more impressed.

“Now the ball can be seen; the players are no longer white dots on the screen,” he wrote.

And the sports television industry was on its way, growing into what it is today.

How much has it grown? Consider this:

In 1960, CBS, NBC and ABC combined televised 540 hours of sports programming, which was only 5% of all programming.

In 1988, an Olympic year, there were a record 1,848 hours of sports on the networks, nearly 20% of all network programming, plus, in any given market, at least 10,000 more hours on cable and local TV.

ESPN alone devotes 4,500 hours a year to sports events.

Not only are there sports on the national cable networks such as ESPN, TBS and USA, but also on newer regional cable sports networks such as Z Channel (soon to become SportsChannel) and Prime Ticket in Los Angeles, Madison Square Garden Network in New York, and at least half a dozen others.

Meanwhile, rights fees, in most cases, are escalating at an incredible pace as advertisers pour more and more money into sports programming.

General Motors spent $212 million on TV sports advertising in 1988, Anheuser-Busch $145 million.

And everyone seems to be getting a piece of the pie, even high schools.

Although high school sports have appeared on television for years, most recently in Southern California on Prime Ticket, in March came the first national TV contract for high schools.

SportsChannel America, which has purchased Z Channel and will convert it to an all-sports format next Friday, made a five-year deal with the National Federation of State High School Assns. to televise 25 events per year, mostly football and basketball games.

SportsChannel reportedly will pay about $1,000 to $3,000 per telecast, or about $50,000 per year. Although most of the money will go to high school associations and not directly to the schools, some high school coaches and officials perceive this as a step toward the kind of corruption that TV money has helped foster in college athletics.

There’s tremendous pressure on college coaches to recruit top athletes because the winning teams get the most money. A college team that goes to basketball’s Final Four gets $1 million.

Many would bend a rule or two for that kind of money. But it pales in comparison to the money professional teams make off television.

The 28 National Football League teams this season will each get more than $17 million from television.

The 26 major league baseball teams this season will each make $9.9 million off national contracts with NBC and ABC. Beginning in 1990, they’ll each make $16.2 million per season off new contracts with CBS and ESPN, plus millions more off local packages. The New York Yankees, besides getting their share from the national packages, get a whopping $42 million per season from a new 12-year, $500-million deal with the Madison Square Garden network.

At those prices, some people have wondered why MSG didn’t just buy the team.

This season, the first of the new deal, MSG is televising 75 games while farming out 75 more to flagship station WPIX. Eventually, MSG may have all Yankee telecasts exclusively.

The Dodgers, it’s estimated, make an additional $18 million to $20 million per season off telecasts on KTTV (50 telecasts) and Z Channel/SportsChannel (35).

Television is the main reason the average salary of a major league player is $513,730, and that 20 players make at least $2 million per year.

Old-time boxing promoter Mike Jacobs predicted in 1939 that someday television might generate $1 million for a major championship fight. People figured Jacobs had lost his senses.

But Jacobs knew what he was talking about. He just underestimated the possibilities.

When Sugar Ray Leonard and Thomas Hearns fought to a draw June 12 at Caesars Palace in Las Vegas, the take from pay-per-view television alone was more than $26 million, according to promoter Bob Arum.

A likely rematch would figure to generate considerably more.

And if the Super Bowl ever gets on pay-per-view? Some experts say the take could be in the $500-million range.

The NFL this year will enter the final season of its three-year deal with the three major networks and ESPN, a package that is worth a total of $1.5 billion.

When this deal was made before the 1987 season, the big news was the inclusion of a cable network, ESPN.

Val Pinchbeck, the NFL’s director of broadcasting, interviewed in his New York office, doesn’t see any major changes next time around.

“A lot remains unknown because first we have to name a new commissioner,” Pinchbeck said.

Pete Rozelle, who masterminded the current setup under which all TV money is shared equally, is retiring after a 30-year stint as NFL commissioner.

In 1958, the Hughes Network paid $200,000 for NFL rights. In 1962, two years after Rozelle took over, CBS paid $1 million. And this season, the total TV ante is around $500 million.

Then there is the prospect of pay-per-view, which is one of the reasons Al Davis moved his Raiders to Los Angeles, the nation’s second largest television market, in 1982.

Davis envisioned some day selling non-sold-out home games as pay-per-view events. With, say, 1 million customers paying $15, the Raiders could gross $15 million for one game.

And if individual teams eventually get into pay-per-view, could the Super Bowl be far behind?

One line of thinking is that Congress would never allow the NFL to switch from network television to pay television because their constituents would oppose it.

Rozelle, appearing before the Senate Judiciary Committee in May and responding to questioning from Sen. Arlen Specter (R-Pa.), said the NFL has no plans to go to pay-per-view in the foreseeable future.

“It’s my feeling the NFL will not embrace pay television before the year 2000,” Rozelle said.

But others think that NFL games will be on pay-per-view television sometime in the 1990s.

Don Ohlmeyer, president of Ohlmeyer Communications and a former top sports executive at both ABC and NBC, said: “The Super Bowl now generates $35 (million) to $40 million. Compare that to the $500 (million) to $600 million it would generate on pay-per-view, and you’re talking about a $500-million turn-around.”

Congress has previously gotten involved in how the NFL conducts its business. In 1961, for example, Congress gave the NFL an antitrust exemption so that teams could pool their TV money.

And in 1973, Congress, using that antitrust exemption as leverage, told the NFL it must televise games sold out 72 hours in advance in local markets. The NFL obliged and eventually adopted that policy on its own.

However, NFL owners might not be as agreeable when it comes to the pay-per-view issue, and might even challenge Congress.

Said Ohlmeyer: “Nobody ever challenged Congress’ blackout ruling. But when you’re talking the kind of money we are here, don’t you think Congress might be challenged?”

Phil Hochberg, a Washington attorney who specializes in sports television, said: “I think the pay-per-view issue will cause the NFL to make a judgment call. The question is, does it want to risk the wrath of Congress?

“I don’t think Congress would tell the NFL it can’t go to pay-per-view. That would raise a First Amendment question.

“I think what Congress would do is threaten to take away the antitrust exemption it gave the NFL in 1961. Would the NFL want to risk losing that?”

Possibly, if the stakes are high enough.

Rick Kulis, president of Choice Entertainment, a Torrance-based pay-per-view distributor, said: “Money always talks. When you’re talking about an emotional issue against an economic issue, the almighty dollar usually wins out.”

Said Hochberg: “Yes, money can be a force.”

Kulis predicts that the Super Bowl might be on pay-per-view as early as 1994.

“There are now 15 million pay-per-view households, and 25 million is considered the breakthrough number,” he said. “We should reach that number in two years.”

If the NFL signs another three-year contract, as it did the last time around, the new contract would run through the 1993 season. Then, Kulis reasons, the league might have to take a look at pay-per-view.

Sound farfetched? Not when you consider that, through a deal NBC made with SportsChannel America, we’ll have pay-per-view at the 1992 Summer Olympics.

How much would viewers be willing to pay for a Super Bowl?

Kulis said the asking price would be around $30 and that the total gross would be something like $250 million, which is less than half the kind of money Ohlmeyer is talking about.

“People would get together for Super Bowl parties, keeping the total gross down,” Kulis said.

Whether the take from a pay-per-view Super Bowl would be $250 million, as Kulis says, or $500 million to $600 million, as Ohlmeyer says, it’s still an awful lot of money.

Although there would be considerable resistance from viewers to a pay-per-view Super Bowl, Hochberg says regular-season pay-per-view would be welcomed by many.

“I think what the NFL would want to look into is making its full inventory of regular-season games available to pay-per-view,” he said.

Thus, for example, a Cleveland Browns fan living in Los Angeles could see the Browns every week. He’d just have to pay for the games.

“Now, the networks tell you what games you can watch,” Hochberg said. “What if you had your own choice? That might be worth paying for.”

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While widespread pay-per-view sports looms in the not-too-distant future, the money now being thrown around for broadcast rights is pretty impressive.

Last Dec. 14, CBS made a $1.08-billion deal with Major League Baseball. It agreed to pay that amount over four years, from 1990 through 1993, for the right to televise 12 regular-season games, the All-Star game, the championship playoffs and the World Series.

Three weeks later, ESPN agreed to pay baseball an additional $400 million for the right to televise 175 regular-season games per season during the same span.

New television contracts with the NFL, the National Basketball Assn., the National Collegiate Athletic Assn. (for football and basketball), and the National Hockey League will all be negotiated late this year and early next year.

Also, in 1994, only two years after the 1992 Winter Olympics at Albertville, France, there will be another Winter Olympics at Lillehammer, Norway, under a new format in which the Winter and Summer Games will be held in alternating even-number years instead of in the same year. Rights to the Lillehammer Games are expected to be negotiated early next year.

So some major transactions in the sports television business are on the horizon.

“The sports wars are just beginning,” said Seth Abraham, HBO senior vice president, sitting in his Manhattan office filled with sports memorabilia. “You could say things are going to go through the ceiling, but there is no ceiling.”

Even Neal Pilson, the president of CBS Sports who five years ago began predicting that rights fees would be coming down, is now starting to change his tune.

He still cites examples of deflation, such as CBS agreeing to pay $243 million for the rights to the 1992 Winter Olympics at Albertville, a decrease of $66 million from what ABC paid for the 1988 Winter Games at Calgary.

But during an interview in his New York office, he said: “It’s not uniform. Some rights fees are continuing to escalate, while others are not.”

Said HBO’s Abraham: “Neal Pilson is a good friend of mine, but I’ve never agreed with his theory of rights fees coming down.”

What’s coming down are the network sports ratings. In 1979, the average network sports rating was 10.0. It was 8.1 last year.

Can the networks, with their sports audiences declining, continue to compete with cable, particularly pay-per-view cable?

Pilson, naturally, thinks they can. “What you’re seeing now is the creation of a format that I think will be around for awhile,” he said.

“The networks will continue doing the major events--the Super Bowl, the World Series, the NBA and NCAA championships, with cable on both the national and local level and local over-the-air stations handling most of the regular-season competition.

“The sports TV business is getting crowded, and we’re all looking for a niche where we can stay in business and make a profit.”

The niche CBS has moved into is one in which there is less emphasis on regular-season games and more emphasis on postseason play. CBS will televise 26 fewer regular-season baseball games than NBC and ABC will show this season.

Bryan Burns, director of broadcasting for Major League Baseball, sees the CBS format as a plus. “It will free up more dates for local telecasts.”

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Even with the cable industry making inroads, the networks, for the most part, still have a pretty good hold on the sports television business.

CBS, the No. 3-rated network overall, has become the dominant sports player. CBS has pro and college football, pro and college basketball, including the NCAA tournament, Major League Baseball beginning in 1990, and the 1992 Winter Olympics.

NBC, the No. 1 network, has pro football, an impressive New Year’s Day college football bowl lineup and the 1992 Summer Olympics at Barcelona, but has no pro basketball and a light schedule of college basketball. And, for the first time since 1947, NBC will have no baseball after this season.

NBC, however, has a new and aggressive president of sports, Dick Ebersol, and a relatively new and aggressive vice president of sports programming, Jon Miller.

“We’re still in the sports business,” Miller said, adding that his network will be active in all the upcoming rights bidding.

Meanwhile, ABC, which used to boast that it was “recognized around the world as the leader in sports television” and billed itself as the network of the Olympics, is now neither.

In 1992, for the first time since 1960, ABC will not have an Olympics. And after doing this season’s World Series, it too will lose baseball.

“Monday Night Football” remains a prime-time force, but for weekend afternoon fare, ABC is left with “Wide World of Sports,” pro bowling and the college football and college basketball that it shares with other networks.

Its big-event lineup is reduced to the Indianapolis 500, the Triple Crown of horse racing, three of the four Grand Slam golf tournaments, the Rose Bowl, the Sugar Bowl and, every third year, the Super Bowl.

Former ABC sportscaster Jim Lampley, now a news anchor at KCBS Channel 2, half-jokingly said: “The network of the Olympics has become the network of May,” referring to last month’s Kentucky Derby and Indy 500.

On a more serious note, Lampley said: “I can envision a day when ABC Sports is made up of three or four executives, one lawyer, two researchers and one or two announcers. Everyone else would be free-lance.”

Said HBO’s Abraham: “I can see the day when there are only two networks in the sports business: CBS and NBC. ESPN will be the sports arm of Cap Cities.”

At a news conference earlier this year in Los Angeles, Dennis Swanson, ABC Sports president, said: “I don’t think we’re out of the major sports business. We still have some very attractive properties.

“And we bid very aggressively for the Olympics and for Major League Baseball. It’s just that other people were willing to pay more--and at numbers we cared not to be associated with.”

THE HIGH COST OF TV SPORTS

Term of Sports TV Package Network Contracts Expiration Major League Baseball Broadcast CBS 4 years Oct. 1993 Cable ESPN 4 years* Oct. 1993 National Football League AFC NBC 3 years Feb. 1990 NFC CBS 3 years Feb. 1990 Monday night ABC 3 years Feb. 1990 Sunday night ESPN 3 years Feb. 1990 National Basketball Assn. Broadcast CBS 4 years June 1990 Cable TBS 2 years June 1990 National Hockey League Sports Channel 3 years June 1991 College Football Big Ten-Pac 10 ABC 7 years Dec. 1996 College Football Assn. CBS 4 years Dec. 1990 Cable ESPN 4 years Dec. 1990 College Basketball NCAA Tournament CBS 3 years April 1990 Olympics 1992 Albertville CBS -- -- 1992 Barcelona NBC -- --

Total Value of Contracts Sports TV Package in millions Major League Baseball Broadcast $1.06 (billion) Cable $400 National Football League AFC $360 NFC $450 Monday night $440 Sunday night $153 National Basketball Assn. Broadcast $173 Cable $50 National Hockey League $51 College Football Big Ten-Pac 10 $115.5 College Football Assn. $60 Cable $70 College Basketball NCAA Tournament $166 Olympics 1992 Albertville $143 1992 Barcelona $401

* NOTE: ESPN and Major League Baseball Source: Network and sports league sources.

MONDAY IN CALENDAR: The local cable-TV sports wars.