Thursday, August 02, 2007

Finally – the NHL gets it right

At long last it appears what arguably may have been the worst decision in Gary Bettman’s 14-year tenure as National Hockey League commissioner may finally be correcting itself. Shortly after the NHL lockout that canceled the 2004-05 season ended, the NHL signed a multi-year national cable rights TV agreement with Versus. Then known as the Outdoor Life Network the so-called national sports network that hockey fans have yet to discover is poised to be pushed out the door by the NHL. In a move that corrects a mistake that has prevented the NHL from moving forward as a sports property, various media reports have NBC, the NHL’s over-the-air national partner, walking away from their barter agreement with the NHL. The NHL would then force Versus out, allowing ESPN to return as the league’s national cable partner. While it’s possible a few select games “might” be televised on ABC, in all likelihood NHL games are not expected to be televised on notational television for the foreseeable future.

NBC still plans on televising NHL games during the upcoming NHL season, the 2007-08 season but intends to offer a dramatically different version of what the network has offered the last two years. While NBC offered five or six weekend NHL games, every weekend featured at least three different NHL games and a pre-game show. NBC’s plans for the 2007-08 season call for one game and a much stripped down pre-game, a shell of what it offered over the last two seasons. NBC and the NHL are “selling” the plans for the upcoming season along the lines of the flexible scheduling agreement NBC has with the National Football League. NBC’s partnership with the NFL permits NBC to choose the games they’ll televise on Sunday nights during the second half of the NFL season. Comparing the NHL to the NFL is at best nonsensical and borders on being insulating to anyone’s intelligence.

"This is the first opportunity that NBC will have to really fight for the rating number that it considers to be its target," an NHL source told Globesports.com’s William Houston.

And as Houston pointed out, networks make major programming decisions months, sometimes years in advance and it’s unlikely the NHL would be talking to ESPN if NHL officials hadn’t been told NBC is ready to walk away from their barter relationship with the NHL.

NBC’s decision to walk away from their NHL agreement appears to mirror the network’s previous barter sports agreement, with the Arena Football League. The 2006 ArenaBowl on NBC earned the network a considerably disappointing 0.7% of the U.S. households. The small audience for the 2006 ArenaBowl was the culmination of a season that earned NBC 0.9% of the U.S. households. In sharp comparison to the 2006 season, the first season of The AFL on NBC earned 1.1%.

On June 30, 2006, the Arena Football League and NBC Sports failed to reach an agreement to extend their broadcasting contract, thus effectively ending The AFL on NBC program. AFL commissioner David Baker said "NBC has been a great partner. We are forever grateful to them for exhibiting our game with the utmost respect and integrity. We wish them well, but are also excited to begin a new chapter that will continue our unprecedented growth."

NBC Sports president Ken Schanzer said "Unfortunately we were unable to reach an agreement. We've enjoyed our partnership with the Arena Football League. It's a great game with great people. We wish them all the best." In an interview with the New York Times, NBC spokesman Mike McCarley said, "We gave Arena Football our best effort, with top production and significant promotion, but the ratings never grew."

During an August 2006 segment of Larry King's interview with owner Jon Bon Jovi, a new deal was hinted at being in development, one superior to NBC's. In December 2006, a deal was struck with ABC/ESPN to broadcast AFL regular season and playoff games. ESPN also assumed partial ownership of the league itself.

NHL ratings have been an unmitigated disaster on NBC and on Versus. After the NHL canceled the 2004-05 season, NBC's ratings average (percentage of households tuned in) for 2005-06 was 0.9, well down from ABC's peak average of 1.4 in 2001-02. In 2006-07, it improved only slightly to 1.0. Those are the numbers that drove NBC away from the AFL. The Arena Football League and the National Hockey League is so poorly received – it’s a product league executives can’t giveaway.

The NHL has paid a terrible price for walking away from ESPN. After Bettman announced his barter agreement with NBC, ESPN announced they wanted the same no-money-down deal with the NHL. Instead Bettman choose a cable sports network (Versus) that reached 65 million homes initially and somehow managed to hit 70 million homes this year.

How bad is the Versus deal – Versus had exclusive rights to game one and two of the Stanley Cup final between the Anaheim Ducks and the Ottawa Senators and exclusive rights to the Western and Eastern Conference finals. Anaheim 40-miles from downtown Los Angeles reached hockey’s pinnacle, with 41 percent of Los Angeles based cable ready homes unable to watch their team compete for hockey’s silver shrine. And remember the Ducks met the Detroit Red Wings in the Western Conference finals – 39 percent of the cable ready homes in Detroit weren’t able to watch the Western Conference finals. ESPN and ESPN2 are in 100 percent of the cable ready homes. It’s pretty simple to understand, if you’re a major sports league you’re national cable sports network partner you’re in 100 percent of the cable ready homes or you’re not a major sports league.

One more log to throw on the NHL – ESPN's ombudsman reported that NHL content dropped 28 per cent on SportsCenter from 2004 to 2007. Simply put – ESPN has become the king of all Sports Media!

Created in 1979, ESPN continued their remarkable growth with a series of announcements in December that included their acquisition of a minority stake in the Arena Football League. In a remarkable series of purchases and business decisions in December 2006 along with buying into the Arena Football League, ESPN agreed to work with NASCAR in securing a new lead sponsor to replace Busch for the sport’s Tier II racing series, announced the creation of a sports film festival with the renowned Tribeca Film Festival, moved forward with plans to expand into England and continued to set cable ratings records with Monday Night Football.

Earlier that month investment bank UBS announced at a New York conference they had determined ESPN value to be $28 billion. UBS said ESPN accounted for 40% of Disney's $70.7 billion market capitalization. Disney owns 80% of ESPN, with Hearst holding the remaining 20%.

"I feel pretty good about ESPN being part of the overall family as it is," said Tom Staggs, CFO of ESPN's parent told Media Post.

UBS made it clear their confidence in ESPN’s value is in part based on how strong the ESPN brand is. Tuesday, the Arena Football League not only embraced UBS philosophy in the value of ESPN’s brand recognition, they married the future of their league to ESPN.

ESPN acquired minority ownership in the Arena Football League as part of a five-year agreement that includes extensive multimedia rights and a minimum of 26 televised games per season, beginning in 2007. The agreement enhances ESPN’s year-round football programming lineup, the most comprehensive in sports television.

Similar to recent major ESPN content acquisitions, the agreement entails a broad range of rights. Fifteen ESPN platforms will benefit from this new agreement, including ESPN, ESPN2, ESPN on ABC, ESPN Classic, ESPN HD and ESPN2 HD; ESPN.com; Spanish-language ESPN Deportes; ESPN360 (the company's growing interactive and customizable broadband service); Mobile ESPN Publishing (the company's wireless content licensing business); ESPN Radio, ESPN The Magazine and other ESPN-branded services (i.e., iPod, video on demand). ESPN also gains the right to both air and syndicate Arena Football League games through ESPN International.

A week later on December 11 ESPN announced: ESPN had reached a multimedia agreement for the domestic and international rights for UEFA European Football Championship™ 2008, Sat., June 7 – Sun., June 29, from Austria-Switzerland, it was announced today by Russell Wolff, executive vice president and managing director, ESPN International, and Philippe Le Floc’h, director, marketing and media rights, UEFA. Under the deal, ESPN’s U.S. domestic television networks will provide exclusive coverage of all 31 matches of the quadrennial tournament – featuring the top 16 European national soccer teams – including Spanish-language telecasts on ESPN Deportes.

Like other recent ESPN rights acquisitions, the agreement provides access to extensive content that will fuel ESPN’s multimedia assets and ESPN International networks. These include ESPN.com, ESPNSoccernet.com, ESPNDeportes.com, ESPN360, Mobile ESPN Publishing, and other ESPN distribution platforms. Additionally, in-progress and post-match highlights can be featured across key ESPN outlets. Outside the United States, rights include telecasts in Canada and Latin America—not including Brazil.

The EURO 2008 deal extends ESPN’s long-standing relationship with UEFA – the Union of European Football Associations, the governing body of football on the continent of Europe. In May, ESPN renewed its agreement with the organization through 2009 for the comprehensive rights to the UEFA Champions League™ matches, the world’s premier international club competition. ESPN and ESPN2 combined to present 12 EURO 96 matches from England and ESPN International featured all 31 matches.

Clearly ESPN has been buying content, content they can distribute over their 15 different media platforms. In an era where content remains king, ESPN fully understands how important content is to their growth.

Media remains an advertising driven business. The more products you have to sell (assuming you have content that can attract an audience and advertisers) the more revenue you can generate. The single best example of how big a media empire ESPN has evolved into are the ratings for Monday Night Football. Eighteen months ago when ESPN agreed to pay the National Football League $1.1 billion a year for the rights to Monday Night Football (and no NFL playoff games or Super Bowls) many media pundits wondered if ESPN had made the biggest investment mistake in cable television history. Wonder no more, Disney, ESPN’s parent company made one of the best decisions in their long history. Week after week ESPN established weekly cable ratings records with Monday Night Football.

ESPN (an acronym for the Entertainment and Sports Programming Network) founded by Scott Rasmussen and his father Bill Rasmussen, and launched on September 7, 1979 under the direction of Chet Simmons, who was the network's first President and CEO.

Just before ESPN launched, Getty Oil Company (later purchased by Texaco, now ChevronTexaco) agreed to buy a majority stake in the network. Nabisco and Anheuser-Busch also bought minority stakes.

In 1984, ABC Video Enterprises, a division of the American Broadcasting Company, bought 80% of the network, and the Hearst Corporation bought the other 20%. That basic arrangement has continued, although ABC is now owned by the Walt Disney Company.

In 2006, ESPN took over all of ABC Sports' broadcast operations and programming, now known as "ESPN on ABC."

The first show was a slow-pitch softball game that aired on September 7, 1979. A few hours later came the first SportsCenter, which had no highlights and audio difficulties during an attempted interview with University of Colorado head football coach Chuck Fairbanks.

To help fill 24 hours a day of air time, ESPN aired a wide variety of sports events that broadcast networks did not show on weekends, including Australian Rules Football, Davis Cup tennis, bowling, professional wrestling, boxing, and additional college football and basketball games. The U.S. Olympic Festival, the now-defunct competition that was organized as a training tool by the United States Olympic Committee, was also an ESPN staple during this time.

Even before ESPN began telecasts, it convinced the NCAA to grant it rights to show early round games of the NCAA Men's Division I Basketball Championship. The game broadcasts were extensive and helped college basketball gain a larger audience.

The seminal moment in ESPN history dates back to 1987, when ESPN acquired National Football League rights for the first time. Initially ESPN and TNT shared Sunday Night Football rights. ESPN was a part of Sunday Night Football for 19 years before switching to Monday Night Football this year.

In 1990, ESPN added Major League Baseball to its lineup. MLB games are still on ESPN today and are scheduled to continue through 2011. The National Basketball Association (along with TNT) are the NBA’s national television partners.

In 1993, ESPN2 was founded, with Keith Olbermann and Suzy Kolber launching the network with SportsNite. Three years later, ESPNEWS was born, with Mike Tirico as the first anchor. (Today, Tirico is play-by-play announcer on Monday Night Football.) In 1997, ESPN purchased Classic Sports Network and renamed it ESPN Classic. The latest ESPN network in the U.S., ESPNU, began on March 4, 2005.

In early February, ESPN announced phase two of their marketing efforts with NASCAR’s Busch Series. Not only is ESPN committing their marketing resources to NASCAR’s “B” series, ESPN and NASCAR officials are working together on securing a lead sponsor to replace Anheuser-Busch who will be ending their title sponsorship at the end of the year. ESPN who purchased a minority stake in the Arena Football League on December 19 now have a vested interest in moving the AFL forward. In early August, ESPN and Major League Soccer announced a comprehensive agreement that includes a minimum of 26 regular season games on ESPN2.

What’s essential in understanding the error in judgment the Gary Bettman led National Hockey League is the nature of the recent rights agreements ESPN has reached with Tier II sports like the National Hockey League. The National Football League, National Basketball, Major League Baseball, the Nextel Cup and the NCAA men’s basketball and football do not need ESPN, ESPN needs those sports properties as their partners. ESPN have taken the next level of sports properties (Tier II where the NHL resides) and created marketing and broadcast partnerships. That’s what the NHL needs, to realize it’s no longer a major sports in America and must follow the lead of other Tier II sports properties.

Though the first six weeks of the NHL playoffs of the 15 top cable sports programs offered there wasn’t an NHL game to be found anywhere on the list for either week. Included in the top fifteen – an ESPN SportsCenter, ESPN’s Pardon the Interruption and an NBA update. Of the top 15 network sports shows one NHL game made it to the top 15, a game on Saturday April 21 ended up 13th. Before Bettman and company start popping champagne bottles spots 14th and 15th also belonged to NBC and something called “Poker After Dark” a midweek show that is aired at 2 AM. Great the NHL somehow manages to better infomercials and inane poker programming offered in the middle of the night.

When the Stanley Cup finals rolled around in part due to being completed ignored by ESPN, Stanley Cup Ratings were so bad soccer’s Gold Cup (ten points if you actually know what the Gold Cup is) generated better numbers on ESPN. Put in the simplest of terms ESPN has become the sports media version of Godzilla – the indestructible force that owns sports. If you’re a sports league and you’re not on ESPN, you’re not a sports league.

For SportsBusinessNews this is Howard Bloom. Sources cited and used in this Insider Report: Globemedia.com and Wikipedia

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