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May 07, 2010
The migration of marquee sports to cable TV continues as Turner Broadcasting agreed to share the college basketball tournament-nicknamed 'March Madness' with CBS Television. The 2011-2024 joint arrangement makes sense because the NCAA basketball tournament is growing to a field of 68 teams, from 65, and broadcaster CBS alone cannot carry all of the early-round games.
The April 22 deal is valued at $10.8bn and runs 14 years. Time Warner's Turner Broadcasting will spread games over its TBS, TNT and TruTV basic cable networks. CBS and Turner share internet video and wireless rights, and will jointly shoulder production costs.
CBS will broadcast all the top games until 2016, when Turner starts sharing the regional final games (eight surviving teams playing in four games). Separately, the Final Four (four teams playing two games) and championship game will alternate between CBS and Turner starting in 2016. That will give Turner four years of televising the Final Four and championship combo, while CBS gets that package for the first four years.
All through the contract, both the Turner Broadcasting channels and CBS will carry the more numerous and less interesting early round games in which the best teams in the tournament play the weakest.
CBS has held the sole rights to the championship tournament for college's top division since 1982 (there are three NCAA divisions), but cable channels cutting into the action continues a trend. ESPN took over pro sport 'Monday Night Football' from ABC Television (both owned by Walt Disney) in 2006, and also nabbed 15 college football championship bowl games for four years starting in 2011 that previously aired on broadcast TV networks.
The NCAA college tournament is an important property because its TV audience is loaded with affluent males that are actually light sports viewers not easily corralled elsewhere in the TV landscape. The tourney skews more up-market than many other sports because college graduates follow their school's teams in the 68-team event.
Sports are highly prized because their ratings are strong and they tend to be watched live, giving broadcast and cable channels clout in extracting higher carriage deals with multichannel TV platforms. However, long-term sports contracts such as this one stretching to 2024 are a financial risk. NBC Universal incurred $223m in red ink on this year's Winter Olympics, despite high ratings, as advertising chilled due to the recession. Some have speculated ESPN dropped out of the bidding for the NCAA tournament to hold money for an Olympics bid.
Interestingly, a Time Warner filing says CBS's losses are capped at $30-90m a year, or $670m in total, which Time Warner is obliged to cover. So for CBS, the joint contract lays off some risk from misjudging advertising revenue demand in the final years of the contract, which averages out at $771m a year.
By waiting until 2016 to get the most expensive final games, Turner Broadcasting gives itself time to negotiate improved carriage fees for its three participating basic cable channels from multichannel TV platforms.
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