ESPN will get real competition from Comcast-NBC merger
Thursday, 20 January 2011 14:26
BY EVAN WEINER
THE BUSINESS AND POLITICS OF SPORTS
If you thought you heard a groan from the Walt Disney offices in Bristol, Conn., Manhattan and LA on Tuesday afternoon after the Federal Communications Commission approved the planned merger between the Philadelphia-based Comcast Corporation and NBCUniversal, you weren't imagining the sounds. The suits at Disney probably aren't too pleased with the FCC's decision to allow Comcast and General Electric's Peacock network and other holdings to go to the altar and be wed.
After all, Disney's cash cow, the so-called "World Wide Leader in Sports" will more than likely get real competition since the folding of CNN Sports Illustrated in May 2002. FOX Sports does program local regional cable sports networks but really has never been an outright competitor to ESPN. Neither CNNSI nor FOX successfully challenged ESPN SportsCenter but that could change as Comcast has the ability to put on a national cable TV sports show as they are doing that locally with some of the company owned regional sports cable TV networks.
Comcast, the largest multi-system operator in the country (with systems located in New Jersey) owns Versus, an all sports channel, the Golf Channel, a piece of the Major League Baseball and a boatload of regional sports networks around the United States, including SNY (a venture that includes Time Warner and New York Mets ownership in the partnership) and in Philadelphia. NBC has deals with the National Football League, the National Hockey League, Notre Dame football, and the 2012 Olympics among the network's sports properties. NBC has not had Major League baseball, the NBA or NASCAR in years. The network does have golf and tennis events.
Versus, or whatever the Comcast owned cable sports network will be called, could become a much bigger player in sports. Right now, Versus has the NHL, some cycling events, the United Football League (if that league makes it into a third season next fall) and some other events. Versus has not be able to get nearly 100 percent penetration onto cable TV's basic expanded tiers thorough the country as of yet.
But that could be changing.
More than likely, in the short term, there will be integration of Comcast sports programming with NBC's sport programming and some of that will end up on cable TV networks which including USA.
Comcast NBC may be too late to the table to bid on some events in the short term.
Disney is talking with the National Football League about extending ESPN's contract with the league for the Monday Night Football package which might bring as much as $2 billion annually to the NFL through 2022 or 2023. (NFL owners are complaining that they cannot afford to continue giving players 59 percent of the league's revenues because of tough economic times. If the reports that Disney is ready to pay billions — which would come out of cable TV subscriber's pockets whether they watch Monday Night Football or not and most of ESPN's potential audience does not watch the channel — it makes it hard to believe the NFL is in dire economic straits as a March 3, 2011 deadline looms as a possible lockout date if the owners and players do not agree to a new collective bargaining agreement.)
The Monday Night NFL package may be a done deal for Disney, but Comcast has NBC's Sunday Night NFL package through 2013 as part of the merger. NBCUniversal was cash strapped prior to the announcement that Comcast was buying 51 percent of the company. Sunday Night Football has been the top rated prime time series on over-the-air network TV in 2010. It stands to reason that Comcast-NBC will attempt to throw as much money as possible to the "cash-poor" NFL owners to keep the franchise.
The big prize, or the "perceived perception" big prize, in TV is the International Olympic Committee's pride and joy events — the Summer and Winter Olympics. NBC Universal has the rights to the 2012 London Games. The IOC, an entity which believes that it is an international entity with the power to dictate to countries policy and has permanent observer status at the United Nations, waited for the FCC to act before it opened up contract negotiations with American TV networks for the rights to the 2014 Sochi (Russia) Winter and the 2016 Rio (Brazil) Summer Games. The IOC can now go ahead and start a bidding war or what they hope is a bidding war between Brian Roberts's Comcast-NBC, Rupert Murdoch's News Corp, Sumner Redstone's CBS (and possibly Redstone's NCAA Men's Basketball Tournament partner Turner Sports) and Disney for the rights to future Olympics.
NBC lost money on the 2008 Beijing Olympics and American networks, particularly in an economic recession and recovery might not want to spend every last Swiss franc to satisfy IOC President Jacques Rogge and his band of merry men for the big prize.
Future Olympics will be seen over a multitude of platforms including over the air TV, cable TV and broadband. All of the US bidders have the wherewithal to provide that type of coverage to the IOC.
Disney has the rights to the Bowl Championship Series through January 2014. Disney and Turner share NBA rights until 2016. MLB's TV deals with Rupert Murdoch's FOX, Time Warner and Disney's ESPN are done in 2013. ESPN's non-exclusive deal with Major League Soccer is done in 2014. The MLS is currently trying to negotiate a new deal with Murdoch's FOX Soccer Channel and is reportedly asking for a 700 percent increase in rights fees. Reportedly Murdoch's channel wants to just slightly more than double payments from $3 million annually to $7 million.
Cable TV sports networks negotiate with other people's money — subscriber fees — and the subscriber is at the mercy of the network or multiple systems operators. It is either all or nothing for basic expanded tier customers.
Comcast and NBC have National Hockey League national cable and over-the-air TV rights. Disney, according to reports, would like to get a piece of the NHL's cable TV deal. This could be the first bidding war between ESPN and Comcast. Comcast owns a team in the NHL, the Philadelphia Flyers. Comcast also has the cable TV rights of a number of NHL teams including the Flyers on Comcast Sports Net, Philadelphia.
There is also another aspect of this deal that could impact local news operations at various NBC owned and operated stations including those in New York and Philadelphia. SNY and Comcast Sports Net Philadelphia already have sports staffs and Comcast could decide to drop the local sports anchors on WNBC in New York and WCAU in Philadelphia to save money.
There was a report in 2010 that WPIX, Channel 11 in New York was considering outsourcing the station's local sportscast to the Comcast-owned SNY but that never materialized. Local news operations around the country have been marginalizing or dropping sports reports within the news show.
Critics of the merger contend Comcast will simply be too big, too controlling of content (critics have ignored how cable TV has been set up, this is nothing new) and that a multiple system operator cannot also be a programmer and that Comcast could muscle out competitors like ESPN by simply dropping the channels from Comcast systems. It is unlikely that Comcast would drop ESPN since the channel makes them money. But there will be disputes. Comcast and the NFL have been fighting over the NFL Network for years. Comcast might have played hardball with the NFL after the multi-systems operator thought it had a deal with the league for a small Thursday-Saturday night package for the Versus network. The NFL decided to keep the games in-house and put them on the NFL Network. After that, Comcast decided the NFL Network charged too much money for programming for their subscribers.
There will always be skirmishes between the multiple system operators and cable networks over money. That will not change with the Comcast-NBC merger.
The merger probably will not be in the best interests of consumers as rights fees, retransmission costs and other fees will continue to go up. The question that needs to be answered is whether Comcast can make the merger work because big media deals over the past 15 years including the AOL Time Warner agreement have been failures. Clear Channel bought out thousands of radio stations following the 1996 Tele Communication Act passage by Congress which was signed into law by President Bill Clinton and that has been a disaster for the company. And for those who are worried about the direction Brian Roberts might take NBC News, here is a question. What kind of job did General Electric do in covering the news? One of GE's properties is MSNBC, a so-called news channel which like FOX News Channel and CNN doesn't cover news but is long on shrill and fake confrontational arguments led by carnival barkers. NBC Dateline once blew up a General Motors truck in 1992 in a staged report called "Waiting to Explode" which questioned the safety of GM trucks.
Comcast has been a major player on the sports scene for a long time. The company owns the Philadelphia Flyers and 76ers and has partnerships thorough Major League Baseball, the National Hockey League, the National Basketball Association, golf and limited National Football League team business arrangements. NBC Sports has properties; a combined Comcast NBC is stronger and has some money to spend. That is music to the ears of sports owners and promoters but not necessarily the sound that makes Mickey Mouse and Disney too happy as ESPN is no longer alone as the undisputed heavyweight champion of sports programming.
Evan Weiner, the winner of the United States Sports Academy's 2010 Ronald Reagan Media Award, is an author, radio-TV commentator and speaker on "The Politics of Sports Business." His book, "The Business and Politics of Sports, Second Edition is available at www.bickley.com, Barnes and Noble or amazonkindle. He can be reached at firstname.lastname@example.org