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Pete Toms Article Archive
Written by Pete Toms   
Wednesday, 02 November 2011 19:20

Last Week in Bizball by Pete Toms

This week in “Last Week in BizBall“, World Series TV ratings and the state of MLB media rights.

LWIB, between Games 2 & 3, Jeff Passan wrote, “In the middle of the most compelling World Series in a decade, one of the overriding themes is that nobody is watching.” Between the conclusion of the LCS and the beginning of the WS, Anthony Crupi of AdWeek wrote, “If the MLB playoff ratings are anything to go by, Fox may be in for yet another rough World Series outing.” Crupi noted that the combination of small markets in the NLCS (St. Louis is the 21st largest DMA and Milwaukee is 32nd) and rain interruptions during the ALCS, resulted in ratings declines over 2010 in the male 18-49 demo of 25% for Fox and 44% for TBS. In the end, a thrilling Game 6, combined with the first Game 7 since 02, made this the highest rated “non -Yankees” WS since 07. From Cynthia Turner of Cynopsis Media:

The final two games of the World Series delivered for FOX, as Game 7 posted a 14.7/25 household rating/share with 25.4 million viewers to score as the highest-rated, most-watched game since 2004 when the Boston Red Sox broke their World Series drought, according to Nielsen. Game 7 also gave the network its highest-rated Friday night program in FOX history. Game 6 was also a dinger with a 12.7/21 fast national household rating/share with an average viewership of 21.1 million viewers for the network. Overall, the 2011 World Series on FOX averaged a 10.0/16 national household rating/share and 16.6 million viewers, for a 19% spike over last year's 8.4/14.

The Sports Media Watch blog reported that the ratings for this WS Game 7 were down 18% from the last Game 7 in 02 (Angels/Giants) and 37% from 01’s Game 7 (Yanks/D Backs). And, “Despite the strong numbers, Friday’s game ranks as the lowest rated and least-viewed Game 7 of the World Series. Since Red Sox/Mets Game 7 in 1986 (38.9, NBC), ratings have declined for each subsequent seventh game.”

MLB’s national TV deals with Fox (AAV $257 million), ESPN (AAV $296 million) and TBS (AAV $100 million) all expire after the 13 season. Given the mixed bag of TV ratings that the entirety of this postseason produced, and the six consecutive declines in TV ratings for WS Game 7s, what sort of market should MLB anticipate for its national media rights going forward? A very lucrative one, I suspect. Yes, the WS doesn’t dominate American popular culture as it once did, but save for the NFL, no TV property does. TV by the Numbers pointed out how valuable the WS is, and has been, to Fox. “The World Series remains an annual force in prime time. Game 7's dominating performance (14.5) also powered FOX to first place finishes in prime time six out of 7 nights the 2011 "Fall Classic" was broadcast. Since 1996 when FOX began airing World Series games, the network has won 64 out of 75 prime time nights, an incredible 85% performance.” John Ourand of the SportsBusiness Journal reported prior to the start of the baseball playoffs, “Fox and Turner have sold out most of their postseason baseball inventory at rates more than 10 percent higher than last year….Virtually no ad time remains for the first four games of the ALCS and World Series on Fox, network executives say.” The aforementioned Sports Media Watch post details how, save for NFL games, Game 7 of this WS compares with other live sports programming:

Excluding NFL telecasts, Game 7 stands as the #2 sporting telecast of 2011, behind only the BCS National Championship Game (AUB/ORE: 15.3, 27.316M, ESPN).

Game 7 topped every game of the NBA Finals, including the clinching Game 6 (DAL/MIA: 13.3, 28.880M, ABC), every NCAA Tournament game, including the National Championship Game (CONN/BUT: 11.7, 20.055M, CBS), and four of five Bowl Championship Series games, including the Rose Bowl (TCU/WISC: 11.3, 20.558M, ESPN). In addition, the game easily topped events such as the final round of The Masters (9.5, 15.257M, CBS), the race portion of the Kentucky Derby (8.5, 14.539M, NBC), and the Daytona 500 (8.7, 15.597M, FOX).

Overall, Game 7 ranks as the sixteenth-most viewed sports telecast of the past ten years (dating back to 2001), excluding the NFL and the Olympic Games.

Compared to Game 7s in other sports, Friday’s game easily topped this year’s Game 7 of the Stanley Cup Final (BOS/VAN G7: 4.8, 8.540M, NBC) earned a 4.8 and 8.540 million, but finished behind Game 7 of the 2010 NBA Finals (BOS/LAL G7: 15.6, 28.203M). This year’s NHL game aired on a Wednesday night; the 2010 NBA game aired on a Thursday night.

It’s pretty straightforward. MLB’s national TV ratings have trended down for many years but because live sports, including MLB, continues to consistently attract a mass audience, their programming has never been more valuable. As well, the cable industry is betting big that live sports is the programming that will prevent their subscribers from “cutting the cord” in favour of so-called “over-the-top” alternatives. With the expiration of their national media deals on the horizon, MLB should anticipate a hyper competitive market for their rights. ESPN has a myriad of platforms that require programming. Versus (soon to be NBC Sports Network) is expected to be an aggressive bidder for any available properties as they look to increase both subscribers and subscriber fees. The same reportedly holds true for Fox and TBS, both looking to acquire more live sports programming to boost, respectively, FX and truTV. Last year, TWC (the country’s 4th largest distributor) rocked the sports TV industry with the announcement that they had acquired the local TV rights to the Los Angeles Lakers, allowing them to launch an RSN in that market. The announcement in May that David Rone had joined TWC as President of TWC Sports is a definite indicator that they will be a major TV sports programmer.

Select READ MORE to see details on MLB's media rights

When MLB’s existing national media deals with ESPN, Fox and Turner were negotiated during the middle of the previous decade, they were largely about TV rights. This next round of national media rights negotiations will be about much more than TV as ESPN, TWC and Fox have rolled out “TV Everywhere” offerings. Tim Brosnan, Major League Baseball’s executive vice president of business operations, told the SportsBusiness Journal earlier this year that “TV Everywhere” is one of the factors in the rapidly escalating value of sports programming rights. “The TV Everywhere revolution that we see happening is part of the driver in this increase in sports rights,” “There is value added when content providers can go on a multiplatform basis.” MLB does not control their digital rights, per se. Instead, MLBAM, the so-called “interactive arm” of MLB, controls those rights. Last November, the SportsBusiness Journal reported that MLB is, “….the only major sports property that sells digital and marketing and media rights separately,” And, “With programming moving across all platforms — television, broadband and mobile — having combined rights is more important than ever, and TV executives interested in bidding on MLB rights in 2013 have told MLB they will never again cut separate deals for television and digital.” The role of BAM in MLB has been controversial since its formation over 10 years ago. Franchise owners with significant RSN interests, most notably the Red Sox, have complained that they, and not BAM, should control their local digital rights. Some internet pundits have long been critical of MLBAM’s policy of not allowing video clips from MLB games to be imbedded on blogs, social network accounts or websites. In this post, (HT Fang’s Bites) Ben Koo points out that video of THE David Freese WS HR was/is practically impossible to find anywhere on the web other than MLB.com. Koo argues that given the average age of WS viewers (reportedly early to mid fifties), MLBAM should be taking the opposite approach to video on the web to connect with a younger audience. Defenders of MLBAM’s role in MLB point to the numbers. BAM revenues last year were reportedly $500 million. More importantly, BAM is reportedly valued at $2 billion, contributing significantly to the health of franchise values. What approach MLB adopts in the near future in leveraging their digital media rights could also be influenced by who their next commissioner is. Should, as rumoured, Bud Selig retire soon after the conclusion of the current CBA negotiations, the aforementioned Tim Brosnan and MLBAM COO Bob Bowman are both potential successors. Bowman has built BAM from the ground up and would likely be its biggest champion, while Brosnan has reportedly been critical of BAM’s dealings with league sponsors.

The same TV industry dynamics that portend well for MLB in their upcoming national media rights negotiations (see the NHL’s huge increase in rights fees negotiated this year) have also resulted in a huge windfall for clubs at the local level. The Rangers, Astros and Padres have all recently benefited enormously from fierce competition for their local rights amongst MSOs, telcos and RSNs. Earlier this year when the Mets owners were looking for an infusion of capital, there was reportedly more interest amongst potential investors in acquiring a stake in the franchise’s RSN (SNY) than the franchise itself. The most profitable asset of Yankees Global Enterprises is reportedly not their baseball team but their RSN (YES). Filings from the Dodgers’ bankruptcy proceedings reveal that their local TV rights are likely worth more than the baseball franchise. Comcast has enacted a strategy for several years where, in markets where they are the dominant cable provider, they make the local baseball franchise a minority partner in their RSN. The Blue Jays owner, Rogers Communications Inc., not coincidentally, operates 5 TV sports channels and is also the dominant cable provider in the Toronto market. I could go on, but it is unmistakably evident that much of MLB’s record revenues and franchise values is directly linked to cable TV’s demand for their programming.

But, is there a “sports cable bubble” that is about to burst? Earlier this month, John Ourand asked, “Are we finally seeing real evidence of cord cutting?” John noted that, according to Nielsen, “Forty of the 41 biggest cable networks saw a year-over-year drop in the number of homes that get their channels.” AND “For the first time in almost two years, not one cable network eclipsed the 100 million-home threshold.” Even ESPN, both the most widely distributed and expensive (exponentially) cable channel, dropped below the 100 million home mark. Is this a trend? Are consumers foregoing cable in favour of over-the-top services? Or, is it as simple as some consumers have been forced to reduce household costs because of a weak economy? (Last week, Multichannel News reported, Cable Gets Clobbered) The good news for pro sports is that early research indicates that the more avid a sports fan you are, the less likely you are to be a cord-cutter. The bad news for pro sports is that non sports fans might be cutting the cord, in part, because they no longer are willing to pay for sports programming that they don’t watch. Cord-cutting amongst non sports fans is worrisome for pro sports because that group of consumers has been subsidizing the skyrocketing rights fees that teams and leagues are profiting from. LWIB, Mike Ozanian of Forbes discussed this situation with Laura Martin of Needham & Co. Martin believes that big media companies will continue to compete and bid up the rights fees for live sports programming because, in our fragmented media culture, it is “harder to aggregate men”. However, Martin cautions that MSOs could meet with a backlash from their 50% of subscribers who don’t watch sports, but, due to “bundling”, are paying for sports channels that are easily the most expensive in their package. (ESPN channels & RSNs) She goes on to speculate that this could lead to reduced distribution of sports channels by MSOs or even the intervention of Congress to protect the interests of non sports fans.

You can follow me on Twitter @PeteToms


Pete Toms is senior writer for the Business of Sports Network, most notably, The Biz of Baseball. He looks forward to your comments and can be contacted through The Biz of Baseball.

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