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For Sale: The National Pastime
William Oscar Johnson
May 17, 1993
Baseball worked out a risky new TV deal with ABC and NBC that puts the game in the business of selling advertising
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May 17, 1993

For Sale: The National Pastime

Baseball worked out a risky new TV deal with ABC and NBC that puts the game in the business of selling advertising

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The fate of the deal was supposed to be decided in Chicago on May 13, when the owners of the 28 teams met to vote on it. They are a fractious, self-absorbed bunch, and there was no guarantee they would approve the contract. Bill Giles, owner of the Philadelphia Phillies and a backer of the new contract, points out the obvious downside: "Economically, we're not going to be any better off than we are now. The first year we'll have 50 percent of what we get now. But in the long term we have a better chance of doing better. The key is the first year." George W. Bush, managing general partner of the Texas Rangers, considers the plan "realistic" but sees negatives too: "I wouldn't try to quantify the losses at this point. I would just say significant—maybe half. This is going to make it extremely difficult for teams to handle the budgeting process. This will affect payroll, in my opinion." And Gerald Scully, professor of management at the University of Texas and author of The Business of Major League Baseball, says, "Obviously a key to this working is the increase in the playoff format. That's where the additional revenue are. Look back at the CBS contract and you'll sec that something like 80 percent of the revenue were loaded on the play-offs and the World Series."

There is some thought that with labor negotiations looming, the bosses will be able to back their players into a corner by threatening to portray them as selfish if they refuse to support the new playoffs, an idea that Einhorn says is favored by 79% of the fans polled. One insider in the world of networks and sports negotiations said coldly, "I smell Dick Ravitch [the owners' labor negotiator] here. He's saying, 'The more we can show the players that there's a very, very uncertain future, the better.' Plus, with no guaranteed rights fees, owners are not as likely to sign players to big contracts anymore."

The arrangement cuts new ground in many directions. The nationally televised game of the week, which was a Saturday-afternoon institution on NBC for more than 30 years before it was switched to CBS in 1990, will now be recast as nighttime network games televised regionally—just as NFL Sunday games are regionalized. There will be 12 dates, six for each of the networks and all of them after the All-Star Game. From four to 14 games will be telecast on each of those dates. The adoption of regional coverage of regular-season games could be a boon to Major League Baseball, according to John Mansell of the TV consulting firm of Paul Kagan Associates: "The median television rating for a local game comes to nine, while the median for a national game is three. The implication is that by segmenting the market baseball will generate more revenue, through local and regional advertisers, than it did before. So there's more money right there."

In another first, baseball will play all of its postseason games in prime time. Einhorn is particularly proud of this: "Our prime-time acceptance by the networks is unprecedented. We're the only sport that has all of our postseason in prime time—not NCAA basketball, not the NHL, not even the NBA has done that!"

Ah, yes, the NBA, which has become the paradigm for TV sports, delivering ratings, demographics and even modest profit to its network of choice, in this case NBC. Two weeks ago the network and the NBA extended their contract by four years, through the 1997-98 season. The rights fee was increased 25% from $600 million in the current four-year deal to $750 million in the new one. The league had wanted an even higher fee but agreed instead to a unique arrangement that will give it a cut of NBC's ad revenue from NBA telecasts in the fourth year. As Barry Frank, superagent at the International Management Group and longtime consultant to various Olympic committees and sports organizations on TV matters, puts it: "Revenue sharing is the approach of the future. There is no reason that the networks should take all the risk of loss while the leagues just sit back and count their rights fees."

Of course, in baseball's case the risks inherent in revenue sharing are infinitely higher than those taken by the NBA. Because of the absence of up-front money, baseball could, in theory, end up with no money for its national TV rights. In practice, many insiders expect that baseball's revenue from over-the-air network television in the 1994 season will be somewhere between $120 and $170 million. (ESPN is expected to renew its baseball contract, but with only three games a week rather than six and at only $50 million.) Unless ad revenue climbs to more than $200 million, baseball will wallow in red ink while the networks will have risked almost nothing and will very likely make a small profit.

Critics of the deal tend to be very harsh. Said the aforementioned insider, "This is bizarre. This is all a mess. Baseball didn't get a dime. And their spin doctors are emphasizing prime time, partnerships, and regionalization like the NFL. This looks hideous to me. What I thought would happen in light of the NBA deal was that baseball would be guaranteed one figure, in the $400 million to $500 million range, and then turn it into a revenue-sharing deal. The truth is, baseball can't get a TV deal. Why? Because there are no heroes. Arbitration, free agency, the labor problems and strikes and George Steinbrenner have taken over."

But other observers see positive aspects to the deal. One of them, Tony Ponturo, vice-president of corporate media and sports marketing for Anheuser-Busch, which happens to be baseball's biggest advertiser, says, "I think it's a smart deal for both sides. The networks haven't had to lay out the big rights fees. And rather than just accepting a big cutback in rights fees, baseball has taken charge. I like this deal because it helps the owners keep managing the game of baseball. Once they had those four or five years of rights fees, maybe they stood back on their heels a bit. Same with the networks. This new structure will force all sides to work very hard on baseball year in and year out. To keep up with the times. To make the game better."

It would be terrific if the game did get better. But given the self-destructive behavior of baseball's owners in recent years—which more than anything else left them with no choice but to make last week's desperate deal—there seems little reason to hope that it will occur.

[This article contains a table. Please see hardcopy of magazine or PDF.]

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