Monday, May 21, 2007

It appears the Baseball Channel has a better plan than the NFL Network has

Last Thursday Major League Baseball owners closed their two-day quarterly meetings announcing they were moving forward with their planned launch of a 24-hour baseball cable channel. The network will make its debut on January 1, 2009 and in many ways will step up to bat a lot farther ahead than where the NFL Network is today. Clearly it appears Major League Baseball (what may very well be a first time ever) had a better plan than the Lords of the Pigskin had when they decided it was time to have their own 24-hour football network.

According to a report and release from The new unit is projected to launch the MLB Network into 47 million cable and satellite homes on Jan. 1, 2009. It will be 66.6-percent owned by MLB with the remaining shares to be held in partnership with Time Warner Cable, DirecTV, Cox and Comcast.

Tim Brosnan, MLB's executive vice president, business, said at the conclusion of the two-day quarterly ownership meetings Thursday that the network's rollout will be the largest in history for any cable network.

"This is not hyperbole, this is fact," Brosnan said during a press conference about a project that was originally approved in concept by the owners in 2004. "In 2009, when this network launches into 47 million homes, that will exceed any other cable television launch in history by 20 million homes. So this isn't a tiny little niche network. This is a fully, broadly distributed television service."

The previous most widespread launch was the combined effort of Microsoft and NBC when MSNBC was re-launched on cable to 28 million homes in July 1996, MLB said in a document provided to the media.

The new MLB Network will also be made available on the basic or digital tier of all of MLB's partner services, rather than the sports tiers, which usually cost extra.

"We wound up with a channel that will start up like no other that has ever started in the cable business," said Commissioner Bud Selig.

There are still nearly two years before the MLB Network makes its debut, plenty of time for the MLB Network to grow by another 10 to 15 million homes. There are many reasons why the MLB Network has come so strongly out of the gate, with two of them being: their cable and satellite carriers are partners and the MLB Network will offer a 26-week Saturday Night Game of the Week.

All somebody has to do is look back at the evolution of the NFL Network, and it becomes obvious what went wrong with the NFL Network, but there is good news; there are workable solutions whereby the NFL can begin to reach the 65 millions homes they hoped to be in by November 24, 2006 when the NFL Network debuted its first live NFL game broadcast, one of eight live NFL games the NFL Network offered in 2006.

Three short years ago NFL owners agreed to collectively invest $100 million in the NFL Network, hoping to turn their venture into a great deal more.The league's decision to build the NFL Network with regular-season games came nine months after it completed deals with NBC Universal Sports on a six-year, $3.6 billion deal to carry Sunday Night games, and with ESPN on an eight-year, $8.8 billion contract to show ''Monday Night Football.'' In November 2004, CBS and Fox extended their Sunday deals for six years, with CBS paying $622 million annually, and Fox paying $712 million. DirecTV extended its contract for $3.5 billion over five years. The National Football League is generating close to $3.75 billion annually in television revenues, an average of $106 million annually for each of the league’s 32 franchises. When you’re generating that much money in television revenues, as a sports league you can take that leap of faith forward.

The NHL Network (available only in Canada) televises a handful of regular season games. Those games however use available broadcast feeds. NBA TV, doesn’t offer games to the American market (games are available via the NBA League Pass). Raptors TV, the NBA’s Canadian version of NBA TV does show NBA games (Raptors, ESPN and TNT games) but again none of the games are produced by the NBA. Major League Baseball remains a sports league without a network.

There are those who will suggest The NFL Network wasn’t created to produce and televise games, however if you recall how the NFL reached this point, it was the inevitable destiny of the NFL Network.

Last fall after the NFL secured network television revenues collectively that are greater then the sum total of NASCAR, NBA. MLB, NHL, the NCAA and the last two Olympic Games combined the NFL understanding that they were dealing from a position of strength, and looked at a number of different options for the eight late season games the league hadn’t sold the rights for.

''I never thought eight games would be so valuable,'' Jerry Jones, the owner of the Dallas Cowboys, said before his team defeated the Eagles, 21-20, in Philadelphia on Monday night last November.

''I get up in the middle of the night to watch international news, and then I turn to the NFL Network,'' Robert K. Kraft, the owner of the New England Patriots told The New York Times. ''I watch it all the time, and many real fans do the same.''In November there was a great deal of speculation the NFL would either use the eight games as leverage to create a national cable sports network or sell the games to Comcast who would in turn put the games on OLN. OLN, which then reached 65 million homes, secured national cable rights for the National Hockey League.

''We hope our potential programming partner can help us get more exposure, even without putting games on the NFL Network,'' Jones said.

Kraft added, ''If we can have the new multisport platform, and the NFL Network continues to grow, that would be the ideal solution.''

For their part, both Comcast and Turner Broadcasting (TNT) made it clear to The New York Times (at least in November) they were very interested.

''We would love to have the NFL,'' said Jeff Shell, the president of Comcast Programming. ''We're thrilled to still be talking.''

Greg Hughes, a Turner spokesman, said, ''At the right price, we're interested.''

Ten weeks later, on January 27, 2006 the NFL realized they weren’t going to receive what they believed was fair market value for the eight games, and announced the NFL Network would host the games. At least for the short-term (six years) Comcast and Turner weren’t interested in investing hundreds of millions of dollars in helping the NFL move the league’s in-house network forward. The NFL reportedly left $400 million on the table believing it made more sense to leverage those eight games in building the NFL Network’s brand.

The NFL Network was a ‘fledging’ operation at Super Bowl XL, reaching 33 million homes. For a league that has established record ratings for the first tens weeks of Monday Night Football on ESPN (in excess of nine million viewers each week), ESPN’s 95 million homes offer the NFL the cable partner it needs to deliver ratings that can justify billions of dollars. The NFL Network didn’t have the reach or the awareness to deliver significant ratings to the NFL when the league decided to make what at best was an ‘interesting’ decision.

“They'll be able to build the NFL Network into something far more significant,” said Marc Ganis, a sports industry consultant in a New York Times report last January. “On the 357 days when games are not being carried, N.F.L. programming will be going into people's homes.”
As the league’s Thanksgiving Day first ever live game on the NFL Network approached the biggest challenge the NFL Network faced remained the networks reach, or in this case, the lack thereof. When they made their fateful debut of live NFL games on November 23, 2006 the NFL Network only 36 months old was available in 41 million American homes. Using their eight game late season schedule as leverage the NFL Network hoped to be in 25 million more homes by Thanksgiving Day November 23, 2006 when the Denver Broncos traveled to Kansas City to meet the Chiefs in an 8 PM game. The NFL Network began a $100 million advertising campaign in late July that focused on the major cable operators that have yet to hear the call of the NFL Network.

That campaign only created more anger between key cable operators and the NFL Network . By comparison, ESPN and ESPN2 are in close to 100 million homes, and Versus the NHL’s cable partner is in 71 million homes. It didn’t help the NFL Network growth in anyway.

“People will go nuts on Thanksgiving when there's a game on and they can't watch it,” Seth Palansky of the NFL Network told the USA Today last summer.

“We think it's asinine that Time Warner (the nation's No. 2 cable provider) carries 12 shopping channels and 50 other channels you don't want — but can't find room for one dedicated to the most popular sport in this country,” Palansky told the USA Today. “We're replacing the kid gloves with bare knuckles.”

The NFL has been very proactive in getting their message to football fans. According to a report in a USA Today just before the NFL offered their first live NFL game, the league aimed one ad at Time Warner said, “Don't let Time Warner ruin your football season. You'll miss NFL games if you don't call and demand NFL Network now.” Another targeting Cablevision, a provider in metro New York, warned, “Don't let Cablevision shut you out.” The ads listed the channel's games and a toll-free number for NFL Network.

Time Warner (who Palansky called ‘asinine’) sent their own not so subtle message to the NFL Network. The cable operators spun why they weren’t prepared to go dancing with the NFL Network.

By the time the Super Bowl rolled around in early February, NFL commissioner Roger Goodell had long since downsized the now overly optimistic goal of being in 65 million homes to much more realistic 50 million homes. It was easy to believe the NFL who stood to gain tens of millions of dollars by giving up on the eight live games and offering the games as a package to a television network the league could have generated more than $400 million a year.

But a Mediaweek report made one issue very clear – the eight game packages being offered on the NFL Network is where it is to stay, at least for the foreseeable future, despite clear evidence that would suggest otherwise. The network has been unable to do carriage pacts with major cable operators Time Warner and Cablevision, contributing to low first-season ratings (1.9 in households, according to Nielsen Media Research). NFL Network pays $400 million a year to air the games, but Bowlen said the deal was more about establishing the network long-term than making money at the outset.

“The owners’ decision to put the games on the NFL Network was to help build a 24-7 network about football,” Bowlen explained. “That is our goal. We’re not concerned about making more money on another TV rights deal. We want to create a year round football network.”

Then earlier this month a New York Supreme Court judge rejected the National Football League's claim that Comcast's move violated a contractual agreement, Comcast Executive Vice President David Cohen said Thursday in a statement.

The lawsuit is part of a larger fight between the closely held NFL and cable companies over telecasting the network. Cable companies contend that football fans who want the channel should pay extra for it. The NFL is pushing for wider distribution so it can increase ad and fee revenue from the operation.

In his May 4 ruling, which focused on agreements between Comcast and the NFL going back to 2004, Supreme Court Judge Bernard Fried in New York County said Comcast “is free to distribute the NFL Network on a sports tier.” The channel features games and other football-related programming.

The ruling places those wishing to access the NFL Network’s programming through a service that forces subscribers to pay an extra $5 per month above and beyond any other NFL Network subscriptions costs.

“The final word on this issue is most likely to come from the appellate courts,” said Seth Palansky, a network spokesman in a New York Times report

Justice Fried found that agreements Comcast had made with the league in 2004 let it shift the NFL Network to a digital sports tier. That permission, Comcast argued, was to go into effect if it did not reach deals to carry eight late-season N.F.L. games on its Versus network for about $400 million a year or for the Sunday Ticket out-of-market package. The games ended up on the NFL Network and Sunday Ticket stayed on DirecTV.

David Cohen, an executive vice president of Comcast, told The New York Times, “The agreements were clear as to Comcast’s right to migrate the NFL Network to the sports tier.”

He added, “This decision confirms that expensive niche programming like the NFL Network belongs on a sports tier.”

While as the NFL’s Seth Palansky suggested the NFL has every intention to appeal the decision but at the end of the day the NFL needs to create a plan that offers the NFL Network real leverage and an opportunity to force the decision makers at the NFL Network to follow the lead of the MLB Network – more games being offered, while at the same time not bastardizing the number of games the league offers their network television partners that collectively generate $3.75 billion annually. The MLB Network is ready to offer at least a game of the week (26 weeks), the NFL Network has to file suit.

And that’s where the NFL’s recent talks of adding a 17th game begin to make more sense. It’s almost like a classic case of connect the dots. The NFL Networks currently offers eight games; the NFL Network would be in a position to add at least 17 more gamed by adding the games that will be played at four neutral sites as has been suggested. Add 17 to the eight games and the NFL Network now has 25 live games, a game of the week early in the season and three games a week the last four weeks of the schedule (the added game and the two current games). That is leverage, that’s a plan that will work. It’s somewhat ironic that the MLB Network is moving forward with what’s missing from the NFL Network – enough live games to attract some serious interest from cable and satellite providers. The solution is staring the NFL in the face, now its time to see if the NFL does what it has to do to move forward.

For Sports Business News this is Howard Bloom. Sources cited and used in this Insider Report: The New York Times and Mediaweek

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