Business of Sports Media 1st Midterm Study Guide

FCC rules on Blackouts

In 1975, the FCC enacted rules barring cable from airing a football game that has been blacked out on local TV because the game was not sold out within 72 hours of kickoff with. Sell out game = 85% of tix sold (and lots of other exceptions). The blackout extended 75 miles from the stadium.

Example of Sports helping solve negotiation impasses

In 2010 Fox and Dish Network and Fox and Cablevision had difficult negotiation. Several Fox channels went dark on Dish for a month! Fox broadcast channels went dark on Cablevision during the MLB playoffs This is NOT UNCOMMON Sports Often Breaks the Stalemate!

Share example:

So....if there were 50 households with sets turned on out of a possible 100 households and 10 were watching a particular program, the Share is a 20. (10 out of 50 =20%)

Ratings example:

So...If there are 100 households in a given market area and 10 are tuned in to this program, the rating is a 10 (10 out of 100 = 10%)

How did we get here?

Sports Coverage Has Both Followed AND Driven Widespread adoption of Emerging Media Platforms: - Boxing with Newsprint in the 1800s - Baseball with Radio in the early 1900s - Baseball and Gridiron Football with Over The Air (OTA!) Television in the 1950s, 60s, and 1970s - Baseball, Basketball and Hockey with Cable Television in the 1970s, 80s and 90s. - All Four Major Leagues (NFL, NBA, MLB and NHL) with Satelite Television in the 1990s, 2000s and 2010s... - Incremental demand for sports in last 60 years; from Game of the Week to 15 games per night!

Share

This is the % of TV households With sets turned on Watching a particular program

Ratings

This is the % of total households Tuned to: a particular program, on a particular network, at a particular time Out of the total available or possible TV households in a given market area

Ratings and Share determinations have significant value in the advertising and sponsorship world.

True

Two types of OTA Network CONTENT

- National - Local

OTA Networks

NBC, CBS, ABC, Fox

1940's: Two Schools had national TV Broadcast Deals

Notre Dame and UPenn

Must Carry

"Must Carry" is a concept that started in the 1970's with the proliferation of Cable. Basically, the concept came from The Communications Act and regulations enacting the Act, that said that Cable operators had to carry on their platforms in a given market area: - Commercial OTA stations - Non-commercial PBS type stations NO FEE was received by the OTA stations if they elect Must Carry but they get visibility and that meant...AD SALES

Class 2: What happened during the week

- College Football ticket sales are down - Nike releases their 30th anniversary of the "Just Do It" campaign ad featuring Colin Kaepernick

Reading #4: "Why ESPN is failing"

- ESPN loses 10,000 subs a day - People are either cutting the cord or never subscribing - ESPN has a charge of $7/month/sub. Add on the other channels and its $9/month/sub - ESPN has revamped its lineup, hoping to "make cable great again" - Traditional sports journalism is ancient history, and new journos like Michael Smith and Jemele Hill are the FUTURE (kinda) - Opinion and controversy is what gets people's attention now - People are just overall not watching as much TV - ESPN spent like crazy for media rights deals and fees, which wasn't exactly crazy because they were at their peak - ESPN depends way too much on sub fees - ESPN didn't account for the declining popularity of Cable - Another problem is the duration of the media contracts. The shortest contract rn is an 11 year deal for the CFP - How can they remedy the situation? Either increase sub fees (though that might accelerate cutting the cord) or establish a profitable, digital presence

Reading #2: "There and Back" SI article

- Edwin Armstrong kills himself -Creation of FM radio - References Vin Scully....around when TV just starting; still around and retired LAST YEAR. What does that tell us? - Birth of Transistor Radio...Why was this important? Because people could listen to games anywhere - Birth of SI in 1954 - Birth of CATV - Location of major league baseball teams in early 50's: 3 NYC; 2 in Philly; 2 in Chicago; 2 in St Lou - 4 cities had 56% of teams - Why baseball focused? America's pastime - First use of TV $ helped build Dodger stadium in early 60's - Dodger deal...$10M for 10 years included all advertising in stadium!! -Comment in late 60's "sports changing...you want to have an impact, become a lawyer" - 1969 Earliest Comcast broadcasts - Mid 70's Ted Turner and first superstation and National sports programming on cable - 24 Hour sports ESPN 1979 - CNN 1980 - the News Cycle Shrinks to 30 minutes from 9-12 hours... - March Madness broadcast on ESPN in 1980....explosion of access = explosion of interest. - 1994 On Today show, Host Bryant Gumbel says "What is the internet anyway?" - Incremental demand for sports in last 60 years; from Game of the Week to 15 games per night...

Reading #1: "2017 in Sports Media"

- Established Sports media world must "Adapt or perish" - "Everything about Sports media has changed!" - 2017 marked a weird year for sports where the norms weren't...well, the norm (ex being "NFL is inviolable") - In 2013, everything was good. Sunday Night Football was killing it and ESPN was making so much money w/ the highest ratings - Then TV ratings went down, especially the NFL - While ESPN used to boost Disney stock, now it's lowering it cause of decreased ratings and large TV contracts - Why? Because Millennial's are overall watching less TV and streaming stuff on their phones - Ratings can bounce back, but in the form of rights deals with Amazon, Netflix, etc/ - Streaming is the future, and thanks to further legalization of Sports betting sports will still be watched

Reading #3: "Cable Vision: Kay Koplovitz"

- Kay Koplovitz pioneered Cable TV in 1977 with MSG Network (which was the precursor to the USA Network). She rarely receives credit however - She was the first to convince cable operators to pay rights fees - She struck deals with the NBA, MLB, and NHL, all while ESPN was small and just getting started - Former NBA Commissioner David Stern credits her for creating the NBA Thursday Double header - She helped kick start ESPN - Showed the potential of satellite in sports with the Muhammad Ali-Frazier fight in 1976 - Pioneered having games during the weekdays (during a time when games were meant for weekends) with the Yankees - Got in trouble initially, but ended up striking a deal with MLB in addition to the Yankees - "The reason Kay has been successful is because she looks at the future"

Hybrids

- League owned media companies (e.g., NFL Network) - Rights holder companies (e.g., IMG) - Cable operator-Network owners (e.g., Comcast/NBC Universal) - Network owners-Team owners (e.g., MSG Network, NY Knicks and NY Rangers) - RSN's (e.g., ATT SportsNet Southwest - formerly Root Sports)

Two types of OTA Network Structure and Ops

- Owned & Operated (O&Os) - Affiliate Stations (Affiliates)

Reading #6: "ESPN's Plan to dominate the post-TV World"

- The ESPN notification about LeBron James coming home was an example of the emergence of mobile for ESPN. More people saw the notification than all the printing publications combined AND more people were on the ESPN website than watching Sportscenter. - The most likely path forward is that ESPN will continue to make billions of dollars from a big cable bundle that is in slow decline, while the company experiments with other ways to make money—for example, with smaller bundles, direct-to-consumer video, and massive digital video advertising—before the bounty from traditional national TV fees starts to fall.

Reading #9: "Big Ten Network's survival story"

- The big Cable operators refused to make a deal with the Big 10, citing it as a "niche channel" meant for "second or third-tier" options - BTN is now a success story with 60 million households. Financially, it's been an unquestioned cash cow for the conference, pumping $12 million to $15 million annually into each school's coffers. - Delany tried for years to strike a deal with ESPN, but when talks died down he began to entertain the idea of a standalone network. People just thought he was bluffing though - After Delany got all the Big 10 schools to sign on, he got into talks with Comcast cause of their presence in the Midwest. Comcast wouldn't budge - Delany then approached FOX, who was very excited to strike a deal - They wanted to mimic NatGeo Channel, which under the radar was owned by FOX but put the NatGeo brand first - FOX impressed by taking the talks seriously, and soon a deal was struck to create BTN - Time Warner and Comcast at first said no in distribution talks. One of the reasons they did this was they were scared BTN would start a chain reaction with other channels (like SEC Network) asking for more money and stuff - BTN suffered PR-wise initially because of the networks coming out and saying they wouldn't carry it - Appalachian St. upsetting Michigan helped legitimize BTN - Due to Comcast and TWC not carrying BTN, students on the 11 campuses were irrate - In 2008 however, both distributors agreed to a deal - BTN is separate from rights deals however, and allowed the Big Ten to sign deals with ESPN, FOX, and CBS for $2.64 Billion

Reading #5: "Taking the pulse of ESPN"

- While some were hesitant to sign the lucrative NBA TV deal, ESPN Pres said yes because he feared FOX or NBC was waiting to steal it - ESPN NEEDED the NBA Package - ESPN and Turner Sports agreed to a 9-year, $24 billion deal to broadcast the NBA - ESPN later laid off 300 employees after Bob Iger revealed that there were some "modest losses" - ESPN went from 100 million+ homes to 87 in a span of six years, losing $1 billion (PER YEAR) in potential revenue - Nonetheless ESPN is still the most profitable in the pay-TV business - ESPN outbidding FOX to move the College Football championship was one of the first examples of ESPN spending more than it needed to - However critics point to ESPN's ludicrous deal for Monday Night Football for setting the bar high for media rights - ESPN jumped on the PAC 10 when they were about to sign with NBC and partnered with FOX to get it - ESPN overall got greedy with TV deals - It's not only ESPN losing subs, its also FS1 and NBCSN -

OTA Economics (National Networks)

1. Affiliate Station Fees (from Affiliate to Nat'l Net) 2. Paid Advertising - Nat'l - across all O&O and Affiliate Stations - Local - Ad investory Reserved for Local Affiliates - Sponsorship of Specific Shows 3. Rebroadcast of Content Library - 2nd Window - Syndication - Licensing

Blackouts

A sports blackout is when a sports event that was scheduled to be televised is not aired in a particular media market(s). This blackout may prevent transmission of sports programming on local broadcast networks and/or non-broadcast platforms such as cable and satellite television.

Four original networks

ABC, CBS, NBC and Dumont

The Current Landscape

Beginning in early 2000s -- for the first time since 1992 the number of US households with a TV has been steadily DECREASING: As viewership of TV channels falls; the most stable TV programming - Sports

Primary Media Platforms

Cable operators Satellite Operators Networks National Broadcast Companies Local TV and Local TV multiple station owners; Newspapers Radio local and national

Basic Cable

Cable service (wired network, cable set top box, and baseline programming) that includes those TV networks that come to a viewer without additional payment. All local OTA Broadcast stations (e.g., NBC, CBS, ABC, Fox + UHF stations) are on Basic Cable Plus a series of not-for-profit stations (C-Span, PBS, Local Municipal, etc.) First "Basic Cable" network was WTBS\Atlanta It was also the home of the Atlanta Braves

The Business Model of Cable and Satellite (The Players)

Cable/Satellite Operators - Comcast, Spectrum, Direct TV, DishTV Broadcast Network Owners - ESPN, Fox Sports or ABC, CBS, NBC some have multiple channels or networks Content Generators/Owners - Who would these be? Cable Subscribers - Consumers; both Individuals (you & me) and Businesses (Bars, Restaurants, Hotels, etc.)

Follow the Money: The Traditional Flow of Revenue from Consumers to Content Owners

Content Owner -> Broadcast Network -> Cable Operator -> Consumers Broadcast owner -> Broadcast rights fees -> Content owner Cable operator -> Per Subscriber fees -> Broadcast Network Consumers -> Monthly Sub Fees -> Cable operator

Local Content

Developed, Produced, Paid for, Distributed & Owned by Affiliate Station Boradcast only by a Specific Affiliate in a Specific Location/Region - Meant to Tie the Station & Nat'l Net into the Local/Regional Community - News - Daytime (talk shows, etc.) - Sports (possibly; unlikely in current market conditions) - Public Service Programming (FCC-Mandated) Production Quality is significantly lower. Long-term Value of Content is low/deminimus.

National Content

Developed, Produced, Paid for, Distributed and Owned by the Nat'l Net Broadcast by ALL O&O and Affiliate Stations - News - Sports - Daytime (soap operas!, talk shows, etc.) - Primetime (Drama, Comedy, Police Procedurals, Cartoons, etc.) - Late Night Designed to fill the MAJORITY of Weekly Programming - but not ALL Long-term Ownership (Library) of National Content can be Extremely Valuable (2nd Window, Syndication, Licensing)

Example of Retransmission consent

Ex: Fox\ DirecTV 2011 Fox had 19 RSN's on DTV Fox had other cable channels on DTV: FX, Speed, Fox Soccer, Fuel and Fox Deportes Also, National Geographic and Fox Movie Channel Fox News deal expired in January of 2011 Fox Broadcast network (OTA) would expire at end of year 2011 Speculation: Fox had been receiving $1.00 per sub (The Per Sub Fee) for its Broadcast network. Fox wanted to increase its retransmission consent revenue for its OTA Network. (Rumor was that Fox wanted a 40% increase, to $1.40 per sub.) DirecTV had about 19M subs...2nd biggest distributor of programming in US at time (now biggest with AT&T Merger). DirecTV paid Fox $19M/month ($228M/year) Fox offered to stay on the air at same price pending dispute; DirecTV said no way and threatened to pull the FOX channels. (Why?) Most of DirecTV's subscribers were affected. So lets do the math: IF Fox wanted $.40 more per Subscriber per month ($7.6M/month); That's an additional $91.2m more per year to Fox!!! $319.2/year asked vs $228M currently receiving

FCC rules on Blackouts (Cont.)

FCC had no control over local stations as to blackouts. This was league controlled. In 2014 the FCC voted on whether to extend this policy; in 2013 only 2 games were blacked out ( vs 1978, when 105 games were blacked out)

The Emergence of Video Broadcast

First TV broadcast of any kind occurs at the 1936 Berlin Olympics

Reading #8: "Fox executives are reportedly discussing buying back their regional sports networks from Disney"

Fox may be looking to re buy its RSN's after the Disney acquisition. The process is somewhat complicated however, as FOX and Disney aren't sure how much the RSN's can sell for.

Let's Talk Television (OTA)

From the beginning of commercial television broadcast transmissions in the late 1940s into the late 1960s, the only television signal available was Over the Air (OTA) transmission. Free for Consumers *You had to buy the TV set and an Antenna, but there was no cost to receive the signal. - Advertisers paid Broadcast Networks to advertise on individual shows. - There were National Networks and Regional (local) Stations. - Important to understand that OTA broadcasting TV is Still in Existence.

Must Carry (Cont.)

In the 1990's there was a change in the law and basically OTA stations could make a Carriage Election every 3 years: Either these stations have to tell the Cable operator they are electing Must Carry for the next 3 years, or Elect what is called the Retransmission Consent route

Expanded Basic Cable Programming Package

Includes all the channels from basic cable Generally includes a few dozen more networks that you've become familiar with...National Geographic, Food Network, some Regional Sports Networks. While these National Networks are carried on cable systems throughout the US, they are not broadcast OTA anywhere. Exclusive creations of the cable TV universe Cater to Niche vs Undifferentiated Mass Market

Affiliate Stations (Affiliates)

Independently Owned & Managed CONTRACTUAL Relationship w/ Nat'l Net Market-by-Market Signal Carriage Pays Annual Rights Fee to be THE Local Market Affiliate Responsible for: - LOCAL Content - Advertising Sales - Staffing - All Station Ops & Logistics Split of Ad Inventory & Responsible for Local Sales & Revenues ex: KRGV

Intro to Cable

Late 1960s - physically laying cable wires provided a method for delivering TV signals to areas which had difficulty receiving broadcast antenna signals. Geographically Remote Areas But also... Densely Populated Urban Areas (High Rise Buildings!) Early 1970's - Cable Operators (companies that install wire networks into jurisdictions) build Cable Systems and acquire programming to broadcast. Up to 20x More Channel Capacity available than OTA. This is the beginning of delivery of programming packages as we would roughly understand them today.

Reading #7: "The numbers don't lie: When LeBron signs, the local RSN wins"

LeBron going to LA can help the local RSN generate way more revenue

Sports Content Generators

Leagues Teams Conferences Schools International Organizations (Ex: IOC, FIFA) Athletes Rights Holder companies League owned Media companies (NFL Network)

Sports and Blackouts (Cont.)

NFL remains the only league to broadcast every one of its games on free, OTA TV in local markets. Other leagues ( MLB and NHL) have blackout rules not to protect attendance but to protect local broadcaster's rights. (Unless a national broadcaster has exclusive rights to a game...there are always exceptions!) The NBA is different. If a game is aired on NBATV, it will be blacked out from local broadcasting within 35 miles of the team's market. Other kinds of league blackouts - Varies by league - MLB most convoluted of all and not likely to go away soon

Owned & Operated (O&Os)

National Network Directly Owns and Operates O&O stations. Responsible for: - Signal - Content (National) - Advertising Sales - Staffing, logistics, Ops, etc. All Major Decisions Mandated from Network HQ Own all National Content Libraries - Important for Syndication

Premium Cable Networks

Networks that individual consumers order and pay for as additional programming in their cable package. Most often they are sports (e.g., NBA TV) or Entertainment Networks (e.g, HBO, Showtime, Starz)

How did Telegraph help print sports journalism?

People from far away could get info on sporting events when the next newspaper is published

Why would a station not elect Must Carry and instead elect to go the Retransmission Consent route?

Probably because of money. Must Carry is nice in forcing the station to be aired but Retransmission consent allows for compensation

The Organization of Mass Media Fuels Regional and National Interest in Sports in late 1800s Key Accelerants:

Rise of "Yellow Journalism" ( sensational headlines, splashy reporting, exaggerated reporting: think Fox News!) and sports reporting. Joseph Pulitzer's New York World in the 1880's was the first publication to have a sports page and sports department. William Randolph Hearst buys the NY Journal and copies and beefs up sports. These Media Companies Need Constant, Fresh, Reliably Evergreen Content!!!

Sports and Blackouts

The NFL has consistently opposed the Blackout rule change. Blackouts and the NFL have been hugely unpopular with the public since they began At least 2 presidents have taken the issue on; not much success. The FCC voted to end government protection of the NFL's local blackouts However, this did not end the policy. The league did agree to blackout suspension for 2015 ( there were no blackouts in 2014); The NFL continued the suspension for 2016.

Retransmission Consent

The OTA station negotiates a deal with the cable operator (or satellite operator...we'll just say the operator) as to the terms and conditions under and by which the Operator can carry the channel. From the beginning of Must Carry regulations until the late 1990s/early 2000s, local stations would routinely grant RC and elect MC. And NO MONEY CHANGED HANDS.

Sports Broadcasting Act of 1961

The Sports Broadcasting Act of 1961 (SBA) exempted pro sports leagues from federal antitrust law so that leagues could pool the individual teams' rights to sell league-wide broadcast rights packages to television networks. Part of that antitrust exemption gives leagues the right to NOT broadcast individual team games.