Monday, July 18, 2011

Rupert Murdoch's News Corp scandal could mean trouble for U.S. sports partners

Monday, 18 July 2011 11:33




The National Football League lockout may be winding down but NFL Commissioner Roger Goodell, the 31 franchise owners and the Green Bay Packers Board of Directors may be facing a much bigger problem in the very near future if Rupert Murdoch's media business problems in England spread across the Atlantic and hit News Corp properties in the United States.

Murdoch has taken a financial hit which has forced him to buy back a significant share of his company's stock. In the case of the National Football League and Major League Baseball, he doesn't have cable subscriber fees to help pay off the licensing fees to show games on over-the-air television. His cable TV properties have no such problems in that most of the ones that pay huge rights fees to teams are on the basic expanded tier which means all of the people who get basic expanded are paying for what a few watch. It is cable TV socialism that makes Rupert Murdoch's business work, a cable TV socialism bill in the form of a 1984 piece of Congressional legislation signed into law by President Ronald Reagan allows the bundling of cable channels to be sold as one to consumers.

The 1984 cable television legislation seems to be at complete odds with the free market principles espoused by Murdoch's news and financial channels but Murdoch is all about money, not ideology.

In 1993, Murdoch gave the NFL a huge amount of money after his company won bidding rights for National Football Conference telecasts and the marriage seems to have been a happy one for both sides. So much so that Murdoch agreed to help underwrite the 2011 NFL Lockout and provide the owners with money (along with General Electric's NBC, the Walt Disney Company's ESPN, Sumner Redstone's CBS and DirecTV) to get along if there was no 2011 NFL season.

That seems like gratitude but the NFL made that demand of over-the-air, cable and satellite TV networks in the last television negotiations and got the five TV partners to agree to their demands.

Back in 1993, the NFL got billions and Rupert Murdoch was able to get his FOX over-the-air television network (although technically FOX is a syndication arm) off the ground. The NFL gave Murdoch and FOX credibility and once Murdoch got that street cred, he was able to work on other United States projects including the launch of the FOX News Channel.

There has never been any hint of impropriety in Murdoch's sports businesses whether it was with over-the-air network contracts with the National Football League, National Hockey League, Major League Baseball, NASCAR and other properties including the Bowl Championship Series or his relatively brief ownership of the Los Angeles Dodgers at the turn of the century.

(Murdoch's FOX Los Angeles regional cable sports network recently worked a deal with embattled Dodgers owner Frank McCourt, some of the money would come out of subscribers' pockets would have gone to help pay the divorce settlement between Frank McCourt and his soon to be former wife Jamie. The deal was stopped by Selig but someone will eventually get big money for Dodgers TV rights from someone whether that someone is Murdoch or some other Los Angeles cable TV entity)

But make no mistake, Rupert Murdoch and News Corp is heavily invested in American sports and given his seemingly significant problems in London that include the folding of the News of the World newspaper, numerous arrests of News International employees, the resignation of the top cop at Scotland Yard in conjunction phone hacking scandal that is engulfing Murdoch's empire that could be a problem for Goodell, Major League Baseball Commissioner Bud Selig and others.

Do sports leagues want to be associated anymore with Murdoch and what happens if there are complaints about Murdoch's suitability to own TV stations in the United States? What happens to the rights deals that Murdoch's people have worked out with sports leagues and teams?

That may be an issue facing Goodell, Selig and others down the road depending on just how large the News of the World and other Murdoch properties in the UK, US and Australia scandal become. Murdoch has shut down the paper and has seen one of his closest associates arrested. That is not good on the resume for TV station license renewals.

Before the NFL, Murdoch's FOX network was a weak collection of UHF stations with the exception of a few cities like New York, Washington, and Los Angeles. Before the NFL, FOX had a few shows that drew some attention, the It's Gary Shandling's Show, the Tracy Ullman Show and Married With Children. Out of the Ullman show came The Simpsons, Shandling's show originally ran on Showtime and then went to FOX. Ullman's show was canceled in 1990. FOX could not establish a late night talk show, the Joan Rivers experiment was a disaster and a 1993 Chevy Chase late night show as a bomb. Not much worked for Murdoch.

Neither Al Bundy nor Bart Simpson, as popular as the characters would become, could bolster FOX. Murdoch's team was buying TV stations and became the biggest owner of over-the-air stations in the United States but by 1993, it was still the fourth network in a three horse race for ratings behind CBS, NBC and ABC.

The NFL changed all of that. Actually, it was Jerry Jones, the owner of the Dallas Cowboys that put Murdoch on the map as Jones and Murdoch negotiated the TV deal that would change everything. The NFL had been prospering from TV rights fees since the 1961 Sports Broadcast Act which allowed the league commissioner, who is also the league's chief negotiator and lobbyist in all things NFL, to bundle the 14 member franchises into one entity in order to negotiate a TV deal. Three decades later, the NFL was a 30 franchise entity with four separate and distinct elements. CBS had the National Football Conference contests and paid slightly more money for the NFC than NBC did for American Football Conference games because the NFC had more major markets. ABC had Monday Night Football and ESPN and Turner Sports split a Sunday night package.

The NFL was being paid $3.6 million over a four year period between 1990 and 1993.

Murdoch's fourth place network was desperate for a game changer and the NFL provided him with an opening. The NFL and Jones were knocked over by Murdoch's bid for the NFC games. Murdoch was willing to fork over $1.58 billion over four years to get the NFC package along with the Super Bowl. Murdoch had a syndication arm but no news division, no sports division, none of the apparatus that CBS, ABC and NBC had. Murdoch knew that the NFL deals with an old philosophy, cash on the barrel head gets serious consideration and because he blew CBS out of the water with his bid, the NFL and Jones knew they would be getting a new partner with a patchwork of big city VHF and small area UHF stations and both sides would have to make it work.

In December 1993, The NFL took the money. In retrospect, it was the right decision but at the time it looked like just a money grab.

In early 1994, Murdoch started to prepare for the 1994 season by quickly established a sports department by giving John Madden an enormous contact and hiring his sidekick Pat Summerall. Murdoch also took Madden's CBS support team and made John feel right at home. Madden would become the face of FOX sports and with the NFL in tow, Murdoch was able to steal VHF stations in Detroit and Milwaukee away from CBS. Murdoch had one of TV's crown jewels, the NFL, and FOX would now be in a position to become a serious player in American TV.

It can be suggested that the success of the NFL and Madden on FOX led to Murdoch to start the FOX News Channel. The over-the-air network, still technically a syndication arm, started producing hits like the X-Files along with Beverly Hills 90210, Melrose Place, In Living Color to go along with The Simpsons and Married With Children. Murdoch didn't have blockbuster ratings but the network was doing okay business and he already had a satellite news network in Europe, Murdoch turned to creating a United States cable TV news channel.

There are no what if questions. The NFL changed the fortunes of both Murdoch and Lawrence Tisch's CBS. In 1993, CBS completed the TV hat trick; it won daytime, prime time and late night ratings. David Letterman had just moved over to the network and things were looking good. But Tisch's CBS did not invest in cable TV, lost the NFL and Madden, football's top star both on and off the field, lost affiliates and would start a downward spiral. Murdoch's FOX Sports added the National Hockey League and Major League Baseball soon after the NFL deal. Eventually Murdoch would gain NASCAR and the Bowl Championship Series. On the cable TV side, Murdoch's regional sports cable networks are still strong despite being challenged by upstarts in the past few years. FOX either owns or has agreements with 24 regionals. There is also a partnership with The Big Ten Network and another with the Pac12 conference.

Murdoch's Fox Soccer Channel has the UEFA Champions League, Premier League, and Serie A among other competitions. Fox Soccer Plus has soccer and rugby programming from around the world. Murdoch's Speed Channel provides NASCAR and F-1 coverage,

Murdoch's Fuel TV presents action sports such as skateboarding, surfing, snowboarding, BMX and FMX.

Murdoch's Fox Deportes provides Spanish-language coverage of UEFA Champions League, Premiere League, and Serie A as well as Beach Soccer and the F.A. Cup. It also presents the Spanish-language Major League Baseball Game of the Week, the All Star Game, and the World Series, as well as division and league playoffs. Fox Deportes probably would not play well with FOX News Channel viewers but Murdoch doesn't really have an ideology except identifying an audience to exploit to make money. FOX Deportes is aimed at Spanish speakers in the United States, some illegal aliens more than likely, not at FOX News Channel watchers.

That's Murdoch.

Rupert Murdoch built over-the-air viable network thanks to throwing money at the NFL, he had built a strong regional sports cable network, he had his news channel and became an American citizen because non American citizens could not own TV networks. Murdoch, the Australian, should not have owned FOX but American President Bill Clinton's Federal Communication Commission in 1995 allowed Murdoch to run FOX because it was "in the best interest of the public."

Murdoch has invested billions in American sports. So far the leagues and teams have said nothing about the events in London. FOX Sports has been above board according to those in the know but league and team operators have to be keeping a close eye on what is going on with the News of the World unraveling because it could have a real impact on their businesses.

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, Barnes and Noble or amazonkindle.

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