KINS 4520 Chapter 7

college vertical integration

- 2006- Big Ten announced it would extend contract with ESPN/ABC, but games not selected would be shown on own network - Conference would own 51% of network and provide all of the programming. Fox Entertainment Group would own 49% and provide the hardware and distributional mechanism required. - In 2015, Ohio State received 21.5 million from BTN rights - 2017, Michigan received 36.3 millions - Other conferences created own media presence and realignment shortly happened with incentive packages

england's premier league

- Antithesis of NFLs on any given Sunday any team can win - Each club can spend as much as it wishes on players without incurring a penalty or a fine - Only once in 20 years has the league championship not been won by one of the 5 major teams (Man City, Man United, Arsenal, Chelsea, and Liverpool) - Some teams never compete for title, and they do not share revenue like NFL, yet Premier League games remain popular, earning billions of dollars each year

team = media corporations

- Boston Red Sox more diversified than Yankee portfolio. P. 227 - Braves - Ted Turner acquired local rights four years before bought team. Team bolstered the network rather than forming a network with the team as its core product - Teams have added media corporations to their holdings and have vertically integrated television and radio into their operations - Substantial growth in profits - Debate on use of media funds at heart of labor conflict in NFL - Wide range of news outlets and bloggers has made the suppression of negative stories difficult - but NFL worked hard to underreport concussion details/statistics

college conference networks

- College sport never went through a period where the media was relied upon to expand its popularity - Initial issue was NCAA controlling how many times one team could appear on national tv - NCAA argued that too many televised games would lead to adverse effects on attendance. - Supreme Court overruled NCAA (Oklahoma case)

phase 2: large-scale revenue from the sale of media rights

- Direct revenue for teams from the broadcast of games - Started in 1890's: Western Union offered free telegraph services to teams in exchange for the right to transmit updates to saloons. They paid each team $17k for the right to transmit game descriptions - The 1910 World Series was the first live rights for 500 dollars. Images were shown in movie theaters. Rights exploded when TV technology came along - 1921 - Radio broadcasts of baseball began. The real fear that radio would hurt attendance (worked the opposite as it created more fans). Every team entered into a contract with local radio stations and MLB itself sold the rights to the World Series with revenues shared by all clubs - The 1950's began the era of home television (NFL and MLB) - Rising Presence of TVs in the US - Elevated player salaries and team values

emerging competition in delivery of games

- Does a media bubble exist? Possible, but.... - Sport has ability to consistently attract large audiences - Need of advertisers to place their product messages before large numbers of people - Consumers' willingness to pay fees through their cable and satellite providers for the entertainment provided by sport

NFL network rights

- ESPN gives NFL 1.9 billion per year for MNF from 2014-2021 - CBS is paying $1 billion per year through 2022 - NBC pays $950 million annually for 9 year contract ·- Fox pays $1.1 billion per year (2014-2022) - DirecTV satellite package costs the company $700 million per year - NFL will have earned nearly $115.2 billion in collective television revenue between 1960 and 2023. - Rozelle right? Created more revenue than though possible. Creates a monopoly and eliminates competition between teams - Could large market teams have made even more??? Impossible to answer

sports and media introduction

- Media has always been integral to financial success, but what was first a medium to increase fans interest has now become THE defining financial component for teams' profitability - Regional sport networks, creation of networks by teams/conferences, web-based platforms - 3 PHASES

sport and media: brief history

- Media was vehicle for team to publicize or advertise. Teams relied on for reports of games and their outcomes. Only way to get statistics - Means to the ends was to make it as convenient and profitable for newspapers to report on a team - Press Boxes build with best view of games. Reporters given access to players and coaches to advance interest - Team owners wanted favorable stories - Competed with Hollywood for storylines

future media issues and revenue potential from phase III

- Merged delivery systems - Internet delivery, fantasy leagues - Cable, broadcast, and broadband possibilities

MLB media rights

- National package that is divided equally among clubs, but each team retains right to sell their games that are not nationally televised in their local markets - Big city teams make more money - MLB.com in 2000 was determined that would be split equally. All owners invested $1 million each. - By 2015, mlb.com had $800 million in profit - Sold part of rights to Disney and distributions NHL games on platform - Despite big markets getting more money, 8 teams have won World Series in last 11 years

future delivery of games

- Of all televised events, games continue to attract some of the largest viewership numbers - ESPN has seen a decline in ratings and led to financial problems. Part of problem is increase in competition across other media outlets - Popularity of sport has weathered economic cycles - Media networks are catching up to trends and updating strategies - Disney owns ABC/ESPN - Comcast owns NBC - Next phase of sport and media will involve competition for games between integrated cable providers and networks and the individual networks created by teams and leagues - Advent of internet based platforms should be carefully monitored - Verizon paid 1.5 billion in 2017 for rights to stream NFL games on mobile platforms - Twitter and Facebook are starting to stream too

profitability of television, the NFL, and revenue sharing

- Sufficient timeouts for commercials and long periods of sustained play - Pete Rozelle proposed a unique idea: Suggested teams surrender their local television rights and permit the league to sell a package of all games to a single network. Teams would then equally share the revenue earned. - Means team in the largest market (NY Giants) would receive the same money as the smallest market (Green Bay) - Rozelle argued that if all teams were financially stable, the league could deliver a large number of competitive games every week, which would make more money regardless of market size - Rozelle wanted a league where any team could win on any given Sunday

phase 1: media and team relationships

- Very few negative stories on early athletes. Owners pressured newspapers, newspapers felt negative stories would make fans lose interest and they would lose revenue - Sport was high profit for newspapers and was relatively low-cost to cover - Initial relationship between teams and media was one of financial reciprocity - Indirect relationship between media and teams

Phase 3 - vertical integration of teams and media

- Yankees and the N.J. Nets - 1999 seemed to be an inconsequential merger of both teams' business operations to improve efficiencies and removal of duplicate operations to increase profitability - Unified marketing efforts to leverage the sale of their broadcast rights to Cablevision (NYC's largest cable operator) - Initially wanted higher revenues, but they examined establishing their independent network - Goldman Sachs invested. Steinbrenner family held the majority share of the YES network in their Yankee Global Enterprises LLC. - Value of the network placed at 3 billion. Yankees worth 3.7 billion. - 21st century Fox bought 80% of YES. Disney then bought FOX for 52.4 billion which includes the YES network

phase 1 overview

Media as advertising for teams and leagues

phase 2 overview

Media as major revenue source

phase 3 overview

Media vertically integrated with teams

indirect relationship between media and teams

Teams earned income from media, but it was through the creation of new fans