CBS Has Reasons for Spending Billions

If you stacked a million crisp dollar bills on top of each other, the stack would be about seven feet high. A stack of one billion would be 7,000 feet high.

So when you’re talking about $6 billion, you’re talking about a lot of money.

Actually, what CBS will pay for the NCAA basketball tournament over the next 11 years is $6.2 billion, but the NCAA, in making the announcement last week, rounded off the number. What’s $200 million when you’re talking billions?

There has been close inspection and much analysis of this deal the past week, mainly because of its price tag. The NFL and NBA still get more per year in rights fees, but those are multi-network, full-season deals.

CBS will be paying an average of $550 million a year for essentially three weeks of programming. Sure, the deal also allows CBS to televise championship events in other sports such as women’s basketball and baseball, but the men’s basketball tournament is what CBS is paying for.

It would appear CBS overpaid, but maybe not.

Remember when the Lakers gave Magic Johnson $25 million over 25 years and everyone was aghast? Well, a few years later, that contract was obsolete.

In 2013, the final year of the CBS-NCAA contract, people could be saying CBS got a steal. There are even profit-sharing clauses in the contract to ensure that the NCAA gets its fair share.

CBS Sports President Sean McManus, in an interview this week, cleared up a few misconceptions. The average annual rights fee is $550 million over the full 11 years, but McManus said 36% of the rights fee will be paid in the final three years of the contract. He said that the annual fee increases from $268 million for the 2002 tournament, the last covered in the current contract, to only $315 million for the 2003 tournament, the first of the new deal. That’s an increase of only 17%.

Although CBS now has the rights to the entire 64-team tournament and has no plans at the moment to sell any early-round games to cable, McManus said that does not mean viewers will be deprived of seeing early-round games in their entirety.

For one thing, DirecTV subscribers now have access to early-round games, and with a DirecTV explosion expected now that it can offer local channels, DirecTV may be widespread in three years.

McManus also said that high-definition technology will eventually allow CBS to broadcast on several channels, possibly within five years.

CBS, for its $6.2 billion, gets the rights to all broadcasting aspects, including radio, cable, satellite and videos, plus such peripheral perks as merchandising, marketing and publishing. But the key may be that CBS now owns Internet rights.

The day after last week’s announcement, CBS Sportsline.com’s stock rose 16% to close at $46.

The value of Internet rights in 2013 is hard to estimate, but for consumers it may mean point-and-click access to the entire tournament.

“The beauty of the contract is that we have control over everything,” McManus said.

For a more objective opinion of the deal, Neal Pilson, former CBS Sports president, was contacted. Pilson, who now owns a consulting firm, is still heavily involved in the business side of sports television. He helped negotiate the recent six-year, $2.4-billion NASCAR deal, and this week a new three-year, $25-million deal for the Arena Football League.

“You look at all the big-money television deals the past 15 years, and all of them, with the exception of the baseball deal we did for CBS [in 1989], have worked out,” Pilson said. “There are certain properties in sports--the NFL, the NBA, the NCAA tournament, NASCAR and postseason baseball--that guarantee viewers. Those properties are worth a lot.”

But did CBS, which outbid Fox by $1.1 billion and ABC/ESPN by $1.6 billion, overbid in this case?

“No, not necessarily,” Pilson said. “Let’s say for argument’s sake Fox came in at $5.1 billion and CBS bid $5.4 billion. Then the NCAA could go back to Fox and tell them they are close, get them to up their bid, then go back to CBS, and so on. That whole process could have driven the price past $6.2 billion.”

SHOW OF SHOWS

You may have had your fill of best-of-the-century lists and award shows, but CBS and Sports Illustrated have teamed for what they are calling the ultimate awards show. It’s on CBS on Thursday at 9 p.m.

“We have an amazing assemblage of sports celebrities lined up,” said Sports Illustrated’s Frank Deford. “That’s what sets this show apart.”

It’s hard to argue with that. The lineup of more than 100 includes Michael Jordan, Muhammad Ali, Wayne Gretzky, Bill Russell, Magic Johnson, Kareem Abdul-Jabbar, Arnold Palmer, Jack Nicklaus, Tiger Woods, Carl Lewis, Jim Brown and Joe Montana. The host is Bryant Gumbel.

SHORT WAVES

The three-year, $25-million Arena Football League deal done this week gives the Nashville Network (TNN), a CBS-owned network that lost out on NASCAR, a 14-week, Thursday-night package, beginning in April. ESPN and ESPN2 will continue doing games as well, and ABC retains the Arena Bowl, the league championship game. The last Arena Bowl got a 1.5 rating, which beats the 1.0 overnight rating for last Sunday’s Major League Soccer championship game between the Galaxy and D.C. United. “There is tremendous growth possibility for the AFL,” Pilson said. . . . Speaking of ratings, the college game of the year, Florida State-Florida, got a 6.9 overnight rating and a 32.4 share in Jacksonville, Fla. . . . A reminder: The Texas A&M-Texas; game today on ABC begins at 8 a.m.

Attention golf fans: ABC offers the 17th Skins Game this weekend from the new Landmark Golf Club in Indio. The field: Mark O’Meara, Fred Couples, David Duval and Sergio Garcia. . . . A panel of experts will analyze the Golf Channel’s “Greatest Golf Moments of the 20th Century” Sunday at 5 p.m. on “Viewer’s Forum.” Thursday at 5 p.m., Greg Norman joins host Peter Kessler for a special two-hour edition of “Golf Talk Live.”

IN CLOSING

ABC is coming off its best Monday night game of the year, the Denver Broncos’ overtime victory over the Oakland Raiders, and has Green Bay at San Francisco up next. On the surface, it may appear to be a Packer blowout, but one thing die-hard 49er fans can point to is the teams’ record on “Monday Night Football.” The 49ers are 34-18, the Packers 14-16-1.

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What Los Angeles Is Watching

A sampling of L.A. Nielsen ratings for Nov. 20-21.

SATURDAY

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Over-the-air Channel Rating Share College football: USC at UCLA 7 12.3 32 College football: Ohio State at Michigan 7 5.8 16 College football: Florida State at Florida 2 2.8 7 Boxing: Diego Morales vs. Adonis Rivas 9 2.2 4 College football: Boston College at Notre Dame 4 1.2 3

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Cable Network Rating Share Boxing: Andrew Golota vs. Michael Grant HBO 2.9 5 Boxing: Lennox Lewis-Evander Holyfield (tape) HBO 2.4 4 Tennis: Martina Hingis vs. Venus Williams FSN 1.1 3 College football: Alabama at Auburn ESPN 1.1 2 College football: Purdue at Indiana ESPN 0.8 2 College football: Oregon State at Oregon FSN 0.6 1 College football: Virginia Tech at Temple ESPN2 0.4 1 Hockey: Montreal at Kings (delayed) FSN 0.4 1 Pro basketball: Clippers at Washington FSN2 0.4 1 Pro basketball: Chicago at Denver WGN 0.4 1 College football: Georgia at Mississippi ESPN2 0.3 1 College football: Miss. State at Arkansas ESPN2 0.3 1

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SUNDAY

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Over-the-air Channel Rating Share Pro football: St. Louis at San Francisco 11 11.3 28 Pro football: Detroit at Green Bay 11 8.5 22 Pro football: New England at Miami 2 6.0 15 Figure skating: Skate Canada International 7 2.2 6 Soccer: MLS Cup, Galaxy vs. D.C. United 7 1.9 5 Tennis: Martina Hingis vs. Lindsay Davenport 4 1.9 5 Soccer: U.S. women vs. the World (tape) 2 1.5 4

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Cable Network Rating Share Pro football: New Orleans at Jacksonville ESPN 4.9 8 Pro basketball: Toronto at Lakers FSN 3.3 5 Auto racing: NASCAR Winston Cup NAPA 500 ESPN 1.3 3 College football: UCLA at USC (tape) FSN 0.2 0

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WEEKDAY RATINGS: MONDAY--Pro football, Oakland at Denver, 12.9/27.

Note: Each rating point represents 51,350 L.A. households. Cable ratings reflect the entire market, even though cable is in only 63% of L.A. households.