Wednesday, January 04, 2012

Is the NBC Sports Network ready to take on ESPN?

NBC rebranded Versus, the NBC Sports Network, early Monday evening following NBC’s broadcast of the NHL’s Winter Classic. The National Hockey League will be a key to any early success the NBC Sports Network enjoys. ‘The worldwide leader’ in sports, ESPN owns national cable rights to Major League Baseball, the National Basketball Association (national cable rights it shares with Turner) and the National Football League (rights it shares with no other broadcaster). If the rights to games are a key to ratings success, the NBC Sports Network is on the road to success.

As chairman of the NBC Sports Group, Mark Lazarus has the monumental task of building a national cable sports network for NBC. The biggest issue? ESPN (which began broadcasting in 1979) owns the rights to every major sports property with the exception of the NHL.

“NBC Sports has a great heritage and legacy, but it had limitations,” Lazarus told The New York Times in mid-December, alluding to its lack of a cable sports side to add financial strength. “The Comcast Sports Group didn’t have that great heritage and legacy. One of the great joys is to create a new group where each side longed for what the other one had.”

Lazarus’ best chance at success lies either in garnering the NFL’s interest in creating a Thursday night package weeks 2 through 9 and offering that package, or offering an identical package that the NFL Network currently offers weeks 10 through 16 of the regular season. Much of ESPN’s success can be directly traced to ESPN’s first NFL broadcast in 1987. The NBC Sports Network is advised not to bid hundreds of millions of dollars on NFL rights, rights that will cost close to $500 million a year.

ESPN reaches 100 million homes; The NFL Network can currently boast 60 million. Time Warner Cable, America’s fourth largest cable provider, still does not offer the NFL Network. The NFL Network’s offering a full season of Thursday Night Football could force a showdown between Time Warner and its subscribers (easier said than done).

On New Year’s Day Time Warner Cable pulled the plug on the MSG Network in New York State, leaving New York City and Buffalo sports fans without the New York Rangers, Buffalo Sabres and other sports coverage.

Comcast acquired a majority stake in NBC Universal, the owner of Versus, in 2011. As a result of the merger, the operations of all Comcast's national sports channels were folded into the NBC Sports division.

NBC Sports Network will be accessible in roughly 76 million U.S. homes on opening day, which is about 23 million fewer than the reach of ESPN. ESPN’s real advantage lies in the fact that it is carried in almost all cable-satellite packages, whereas Versus/NBC Sports Network is a part of a package that many subscribers don’t purchase.

The cornerstone to the NBC Sports Network’s potential success will be the 90 NHL regular season games they own the rights to. These 90 do not include the Stanley Cup playoffs, the NHL’s two month playoff marathon, of which 50 games targeted for the NBC Sports Network. The NBC Sports Network will also focus on NBC’s Olympic rights, which could result in as much as ten-hours-per-day of coverage during the Games.

The NBC Sports Network will additionally cover 38 regular-season Major League Soccer games, 13 IndyCar Series races, 14 hours a day of Tour de France coverage throughout most of July, 20 hours of horse-racing coverage around the Triple Crown, and 40 college football, basketball, and hockey games in its early stages. The college football coverage – their big games – is similar to NBC’s Notre Dame home- game rights agreement.

NBCSN's college football games, which this season ran opposite ESPNU games, reached an average of 0.2% of its available households, compared to ESPNU's 0.3%. On Monday, January 2, ESPNU opened ESPN’s day-long college bowl game coverage with a game featuring Penn State and Houston meeting in the Ticketcity Bowl. On Versus (the name changed just after 6 PM eastern time) was a replay of an old NHL Winter Classic game.

But it seems hockey will be a key. The opening program on the rebranded network was “Cold War on Ice," a 90 minute special (that began shortly after 6 PM opposite ESPN’s Rose Bowl coverage). “Cold War on Ice” looked back at the legendary 1972 Canada/Russia hockey series. The show belonged on Canadian TV - not on an American sports cable network, let alone as its debut program.

Clearly those in charge at NBC Sports realize they have what can best be labeled a ‘work in progress’.

"You’ll see us change over time, they aren’t going to occupy as much space as they have in the past and over time we’ll be very selective and strategic about how we showcase the ’field sports’ programming," NBC Sports President Jon Miller told Multichannel News. "They’ll still have a home on the network for a while, and that portion of our programming will be rebranded as ’NBC Sports Outdoors.’ We won’t have as much of it, but there still will be a place for it on our air."

"I’m in my 34th year with the company and I can’t imagine anything in my career that could ever be more exciting and challenging than to be a part of this," Miller said. "We have a one-year vision, a two-year vision, a five-year vision and 10-year long-term vision and all of those things are within our grasp. We have a great partner in Comcast, which is committed to sports programming evidenced by the huge investments they’ve made over the last eight months."

But the key might (will) be the NFL. The NBC Sports Network will add a two hour Sunday NFL preview show that will begin at 10 AM. The NBC Sports Network NFL Sunday show will be up against ESPN’s long-standing NFL Countdown and the NFL Network’s 'NFL GameDay Morning’.

When the NFL makes the additional Thursday night package available (expected in the next few years), it’s likely whoever wins will pay close to $500 million for the rights to eight games. ESPN is paying the NFL $8.8 billion ($1.1 billion a year) for their latest eight year Monday Night Football agreement. The ESPN agreement does not include any playoff games. ESPN pays more for NFL games than does NBC, CBS or Fox. The NFL’s terrestrial (over-the-air) partners each have playoff and Super Bowl rights.

The eight-game Thursday night week 2 to week 9 package represents the ‘perfect storm’ for the NFL (at least in terms of selling their rights). Not ESPN nor NBC can afford to bid. The real question is whether ESPN will attempt to squash the NBC Sports Network by overbidding for the rights. Will NBC realize what ESPN understood in 1987 – that the NBC Sports Network must have the NFL if the network is ever going to work?

The answer – times have changed a great deal since 1987 when ESPN began televising Sunday Night Football. Cable TV was in its infancy in the 1980s; today there is a 500-channel universe.

The NFL is the sports industry’s gold standard, but it might make more sense for NBC to let ESPN overbid (and overpay) for the NFL, saving the excess funds on securing cable rights for Major League Baseball and the National Basketball Association. ESPN will retain their share of MLB and NBA, but with hundreds of MLB and NBA games to go along with their NHL programming, the NBC Sports Network will still offer solid programming.

ESPN is sports and sports is ESPN, and NBC Sports leaders likely know that. ESPN has the BCS and is expected to renew their current four-year agreement (through the 2014 BCS games) in the near future. ESPN is next expected to try and grab Fox’s MLB rights agreement, which will put the World Series on ABC - the LCS that Fox has on ESPN. ESPN has NBA rights. ESPN is the monster that has all but eaten the sports industry.

The NHL has a GREAT partner in NBC. The NHL attracts the much coveted 18-34 year old male demographic. The NHL is a sport ESPN is largely ignoring.

Maybe the best strategic decision NBC will make is to not compete with ESPN, letting ESPN spend billions of dollars. At the same time, NBC Sports can showcase the NHL, MLS and lesser sports while building an audience.

Perhaps ESPN is too big and can’t be beaten, but maybe in a 500-channel universe creating and building a network with great ‘overall programming’ will make money and draw an audience. This may be the best strategic move for the NBC Sports Network.

For Sports Business News this is Howard Bloom

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