Arledge, who since 1977 had been ABC's president of both news and sports, insists he was delighted to leave sports. "Henry Longhurst [the late golf writer and announcer] once said that having sucked the juice from an orange, you don't feel compelled to chew upon the rind," he says. Others are sure that Cap Cities forced Arledge out, at least partly because he had spread himself too thin.
It is not too much to say that Arledge established sports TV as an industry. He took over ABC Sports in the early 1960s and promptly turned it into a profit center that the rest of the network built itself around. But eventually the other networks caught up. After 1977, Arledge turned most of his attention to running the news division. In the hallways, Sports staffers called Arledge the Wizard of Oz ("Nobody can see the wizard!"). Before Spence could do anything, he had to first clear it with Arledge. And when Arledge was off directing coverage of the invasion of Grenada or a presidential election, weeks would go by before Spence would hear back on such things as announcer assignments or how much money to pay the bowling tour.
Even so, Arledge and Spence might still be running ABC Sports today had they not negotiated contracts that Cap Cities considers horrendous. The current NFL agreement, which Arledge negotiated in 1981, cost ABC $160 million in rights fees last year. Less than $135 million was recouped from advertisers, leaving a net loss of at least $25 million. The terms of the 1983 baseball contract, which was Arledge and Spence's baby, called for ABC to pay $575 million for six years, including 120 prime-time telecasts. But only a few months after the deal was concluded, the network, having met resistance from advertisers, decided to cut the number of prime-time games by more than half. This in effect guaranteed an annual loss on the network's baseball package of millions of dollars through 1989. In 1984 ABC signed a $309 million agreement to televise the 1988 Calgary Winter Olympics, which now has Cap Cities accountants squirming. It came as no surprise when ABC failed to make a serious bid for the 1988 Seoul Summer Games last fall.
ABC, of course, has company in its misery. The only shocking development now would be if the Cap Cities' philosophy didn't rub off on the other networks.
"You add up [the numbers] and there's no profit. It's gone," says CBS's Lund. "But the impact hasn't been felt yet, at least not entirely, by the leagues. The reason is that the [new] baseball and football contracts haven't come up yet. That's where the rubber is going to meet the road—when there is either a leveling off or a diminution in the rights paid to those leagues." CBS feels justified in having recently renewed its NBA contract—ABC having dropped out of the picture—for four years at an average $43 million annually (up from $22 million per year), because, says Lund, it's the one sport whose ratings have gone up in the last five years. It's also the one sport on CBS's schedule that has been substantially profitable for the last few years.
A good example of an event gone sour is the Belmont Stakes, which CBS has aired for 20 straight years. Its ratings have decreased 58% over the last five years, and thus it won't be back on the network next June. CBS wanted to keep the Belmont for its prestige value, but the cost—$3 million a year—was too high. To make a profit, CBS would have had to lower its price to less than $1 million. At last report, the New York Racing Association had been looking for a deal with ESPN. Watson, Lund and Swanson predict flatly that the networks once again will lose money on the NFL in 1986. The problem: While their rights payments to the league will rise 11% over those of 1985, to a total of $500 million, the market for commercials for NFL and other sports telecasts has become soft and fragmented. Some of the advertisers who helped drive up the prices in the first place, such as computer and video-game manufacturers, have dried up or moved out of sports entirely. A further sign of the times: The Miller Brewing Co. spent 95% of its advertising dollars on sports TV five years ago, but now only 70% goes into sports. Says Miller spokesman Steve Forsyth, "Sports programming used to be a bargain compared with prime time. Now it's as expensive or more. With that, other types of programming become just as important. We are using MTV, late-night shows like David Letterman and some comedy programming to reach our target audience." Says Steve Leff of Backer & Spielvogel, the advertising agency that buys spots for Miller, "Prices are affected by demand, not ratings. For years sports was the most efficient way to reach the male target audience. Now, other vehicles such as news and late-night programming reach it, and the market has started to correct."
The sports glut on TV—there are now 1,500 hours of network sports programming per year, compared with 1,175 nine years ago—has further contributed to the buyers' market. As Neal Pilson, executive vice-president in charge of sports and radio at CBS, says, "If there are 10 advertisers outside my door looking for five opportunities, I have the leverage. If there are five people outside and 10 opportunities, it's hard to set a price because they know they only have to sit there and wait."
That is exactly what is happening. Each week during the 1985 NFL season, network ad salesmen held what became known as Friday afternoon fire sales. Like an airline selling standby seats at discount before a departure, the networks booked unsold commercial spots below their full-price rates. Some of last year's commercial time was sold for less than 1983 and 1984 prices.
The implications are obvious for the NFL, which derives 60% of its revenue from TV—a cool $16.5 million per team in 1986—and must renegotiate its network contract next February. One effect of any falloff in TV revenues: less money trickling down to the athletes. Are the heads of the players associations getting the message? Apparently not. Gene Upshaw, executive director of the NFL Players Association, dismisses the talk of hard times in TV sports as so much posturing. "I just can't see [NFL TV rights] going down or staying even," he says. "I mean, last season was one of the best the NFL has ever had."
"I wouldn't give too much credence to [the networks'] statements," says Donald Fehr, executive director of the baseball players' union. "I think you have to recognize the possibility that this is just a bargaining strategy."