TELEVISION : Executives: Days of Deep Pockets Waning

When the National Hockey League’s new one-year national television contract with SportsChannel America was announced Thursday, the reaction at network and cable sports offices was predictably giddy.

In the executive suites of sports franchises and league headquarters, the hockey numbers were nothing less than a puck in the teeth.

A contract that had paid the NHL $17 million a year over the previous three seasons will only provide $5.5 million in 1991-92, almost a two-thirds reduction in rights fees and perhaps the clearest signal yet that the era of big spending -- particularly by the major networks -- for TV sports is ending.

“Hockey is the first chapter in what will become a story in a book that will be concluded two years from now in mid-1993, when we go back to the baseball and football contracts,” said Dick Ebersol, president of NBC Sports. “The most radical change is yet to come, and I think that will be in baseball.”

“The hockey deal is a microcosm of what to expect in the future,” said Steve Solomon, a senior vice president at ABC Sports. “It’s very telling.”

CBS already is losing an estimated $275 million before taxes in its four-year, $1.06 billion deal with Major League Baseball. The ESPN cable network is expected to lose $40 million this year for its share of the baseball package.

All three networks -- NBC, ABC and CBS -- are facing losses in the first two years of their contract with the National Football League, a $3.64 billion extravaganza over four years that also included ESPN and Turner Network Television. College football also is said to be suffering from low ratings and weak sales.

Almost every Friday afternoon before a big weekend of sports on the air, TV ad reps often are selling 30-second commercial units -- inventory -- at fire-sale prices to advertisers willing to wait until the last possible moment to get lower rates. Lately, the Friday afternoon bargain-basement sales have been starting on Tuesday or Wednesday.

There are other signs. When CBS begins its prime-time telecasts of the two League Championship Series this week, there will be no pre-game show. Instead, CBS will attempt to build its audience with entertainment programming, with commercial inventory that is far easier to sell -- at retail prices. In better times, pre-game shows were used as a vehicle to get more advertisers involved in a premium event.

Pro and college sports executives know they must come up with solutions to revenue shortfalls resulting from lower rights fees.

“Advertisers are spending less on TV and more on multimedia opportunities,” said NBA Commissioner David Stern. “They’re not getting the bang for their buck on the networks, and the networks are under enormous pressure. ... It’s only going to get more difficult. This is not a dip; it’s a fundamental change in the television business.”

NFL Commissioner Paul Tagliabue, who declined comment, has already said his league will experiment with pay-per-view television, probably during the 1994 season, though he has testified before Congress that free TV will remain the primary vehicle, and the Super Bowl will stay on free TV at least through this century.

The next NFL contract most likely will be structured similarly to the current deal, but Tagliabue also will be eyeing increased exposure on cable.

Stern, whose league earns a profit for NBC, said he also is committed to keeping his league on network television, but that “we’re also trying to position our sport to survive in an enormously changed economic environment.” More cable is also in the NBA’s future, he said.

The baseball people aren’t saying much of anything. “We’re in the midpoint of a contract we won’t seriously discuss renewing until this time next year,” said David Alworth, broadcasting director for Major League Baseball. “I don’t think one contract signing (hockey) in one sport has anything to do with our cycle of negotiations.”

One network executive said, “The football people definitely understand what’s going on. I can’t say the same for baseball.”

Still, almost everyone understands some of the root causes for TV’s woes, most of them having to do with choices. More than 60% of the country is wired for cable, and millions more have satellite dishes and descrambling devices that make programming available at reasonably affordable prices.

In the late 1970s the networks commanded more than 90 percent of the U.S. television audience. Now that percentage hovers in the 60 percent range.

Ratings for all network programming in general and sports in particular have shown dramatic drops. The 1980 World Series between Philadelphia and Kansas City, for example, had a 32.8 rating and a 56 percent share of the audience. The 1990 Series between Oakland and Cincinnati drew a 20.8 rating and a 36 percent share. Similarly, post-season NFL games in 1980 drew a 29.5 rating, compared with a 23.7 last season.

The television industry paid record rights fees when a recession was looming.

“When we made the deal, the feeling was that baseball was a major television asset and property,” said Neal Pilson, president of CBS Sports who made that much-criticized deal, shifting baseball from NBC, where it had been a mainstay for 41 years.

“It still is. We shouldn’t trash the sport as we trash the deal. We thought it would provide ratings and promotional help for us in prime time, and that the economics, while we never thought would be terrific, were supportable.”

When the baseball and football contracts come up for discussion next year, and later when negotiations open on the 1996 Olympics in Atlanta, all signs point toward a downward swing in rights fees, which also could lead to a downward swing in team profits, which also could lead to the final frontier for player salaries and other compensation.