Breaking Up With Your Media Rights

NBC-MLSToday’s post is courtesy of guest blogger Sreesha Vaman.

Q:  What do NBC Sports and President Obama have in common?
A:  They both have “lame duck” years starting in a few months.

Just as this year’s mid-term elections will essentially be the last election under this POTUS’ influence, so will NBC Sports be in the awkward position of having to play out the last year of its MLS contract. Also in a similar position is TSN, which is in the unenviable position of having to cover an exciting NHL playoffs for the last time in the foreseeable future. How the two stations choose to use their last minutes with their sports will have an influence on the value of those rights in the future.

In my view, if you are a network, breaking up with your sports property is similar to breaking up with your life partner: you might be upset and vengeful today, but these emotions will likely pass, so you are better off breaking up amicably. By keeping a good relationship with your ex, you put pressure on your ex’s next partner. If the challenger fails, you look golden; if the challenger succeeds, you stand to gain more from being friendly than from being icy.

Let’s consider recent precedents:

– ESPN and the NHL, 2004

After a long relationship, ESPN chose not to renew its NHL rights after the 2004-2005 lockout, but as SB Nation points out, ESPN had already made a decision to demote hockey as a property in 2002, after winning exclusive NBA rights. The result: ESPN reduced its NHL coverage by over 40% (from 143 games in 1999-2000 to just 84 telecasts in 2003-2004), and all but eliminated its ancillary hockey programming. Naturally, no one was surprised by the commensurate dip in ratings.

Fast forward ten years later. Interest in hockey in the U.S. has arguably never been higher – not just in the traditional markets, but in places like Los Angeles and Dallas. ESPN’s replacement, NBC Sports, gets a lot of the credit for building the sport back from the dark days of the lockout, and was rewarded with a 10-year rights extension complete with multi-platform rights and expanded exclusive windows in 2011.

Though both parties have repeatedly denied this, it’s seems to me that there are still some wounds to heal between the NHL and ESPN.

– Fox Soccer Channel and MLS, 2011

NBC Sports outbid Fox Soccer Channel for the rights to the MLS in early August 2011, leaving FSC in the unenviable position of having to promote a marquee property destined for a competitor in order to promote the entire sport and platform. Yet FSC took on this challenge with gusto, promoting the MLS playoffs with gusto (the actual championship was aired on ESPN). Altogether, FSC saw the number of households watching its MLS coverage grow by 32% according to Wikipedia.

This put a lot of pressure on FSC’s successor, NBC, to continue to build on the presence of the league and the sport. While by all accounts NBC has done well with MLS, the network’s ultimate goal — to connect its MLS coverage with its Premier League coverage — remained elusive.

Back to today…

MLS’ new deal with Fox moves the league to Fox Sports 1, with full multi-platform marketing support (including potentially, depending on the fine print, Spanish-language Fox Sports Deportes), and connects MLS with Fox’s other soccer properties, including the U.S. National Team, the Champions League, and after this summer, the World Cup. (N.B. — MLS renewed its presence on ESPN concurrently with its new deal with Fox).

Early indications are that both TSN and NBC will continue to build on its outgoing properties during their “lame duck” tenures. TSN recently announced another suite of channels – mimicking the BBC, TSN is naming their channels TSN 1-TSN 5 – and has reiterated that its goal to be Canada’s “home of hockey” through its regional NHL coverage as well as major junior and international hockey. Meanwhile, NBC, while expressing disappointment at MLS leaving for Fox, has announced its intention to present Prem-MLS double headers as originally planned, and will continue its commitment to growing the sport at all levels.

Whether the networks stay with this spirit when the disappointment of the contract negotiations dissipates remains to be seen. But so far, it would appear that both NBC and TSN should be applauded for remaining committed to their partnerships.

Sreesha Vaman has been a capital markets professional for over 10 years, including advising clients in the sports industry. He currently lives and works in New York. The views and opinions expressed here are his own and do not represent the views or opinions of any other company or organization.