Fat And Unhealthy

The Right Stuff Average Yearly revenue for the major sports leagues from national TV contracts: The future looks better for the NBA than for the NBA and MLB.
	Previous contract	Current contract	Projected contract
NFL	1987-89	1990-93	1994-?
	$466	$912	$560
NBA	1986-89	1990-94	1994-?
	$62	$219	$225
MLB	1984-89	1990-93	1994-?
	$183	$365	$183
DOLLARS IN MILLIONS

If the networks don't correct this spending, people will not get spoils on free TV in the future. I don't want to see sports being broadcast out of little bread trucks as viewers put coins into a little box to watch games.
—DICK EBERSOL
PRESIDENT, NBC SPORTS

During the fall of 1990, the NFL began hearing complaints from the sports divisions at ABC, CBS and NBC that they were losing millions of dollars a year on their coverage of pro football. At the time the league was in the first year of its four-year contracts, worth a total of $3.65 billion, with the three big networks plus ESPN and TNT. Not until last summer, though, did Cleveland Browns owner Art Modell, the chairman of the NFL's television committee, fully realize the seriousness of the financial woes at ABC, CBS and NBC. For the first time, the networks opened their books to the TV committee, allowing it to scrutinize sales orders and the prices charged for commercials.

After consulting with members of the advertising industry, Modell's committee projected that the three networks would lose $260 million on pro football telecasts over the course of their contracts with the league. Worse yet from the NFL point of view, the league looked to be headed for a severe hit when the contracts expire at the end of 1993. Each of the 28 NFL teams was scheduled to receive $41 million in television rights fees in 1993, but according to Modell's calculations, that figure could plunge to $28 million in the next TV deal. Modell suggested that he and his fellow owners flatten their '93 payout to this year's rate of $34 million per team and extend the TV contracts at the same amount through 1995. In other words, Modell proposed that the NFL reduce its previously negotiated rights fees for next year by $196 million.

That didn't happen. Instead, late last month the owners voted to reduce their 1993 rights payments by only $28 million, or $1 million per team. While the owners have promised to discuss a contract extension again sometime this fall, the TV committee isn't too hopeful that anything will come of the talks. "I'm frustrated for a group of very bright men who don't want to be bored with the facts," says NFL president Neal Austrian, the league's top-ranking official after commissioner Paul Tagliabue. "There will be a shocking reality at the end of this contract."

Says Dennis Swanson, president of ABC Sports, "It's just as well that we finish this contract and negotiate a deal that gives us the kind of circumstances we need. We might be better off to take our lumps and then get it fixed properly."

The kind of circumstances we need? Get it fixed properly? Is anyone listening?

Never before have the sports divisions at ABC, CBS and NBC and the leagues faced such uncertainty. Through the late 1980s the three networks enjoyed healthy financial partnerships with the NFL and other major sports properties, but the climate changed once the recession took hold. On top of that, between December 1988 and March 1990 CBS had jolted the broadcast industry by committing a total of $3.5 billion to televise the NFL, Major League Baseball, the NCAA basketball tournament and the '92 and '94 Winter Olympics.

For the past three years Ebersol has been sports television's voice of concern, knocking CBS's spending spree at every turn. His primary target has been CBS's four-year, $1.06 billion deal with baseball. By contrast, baseball's previous contracts with NBC and ABC had been worth $1.1 billion over six years. "The baseball rights fees were disastrous," says Ebersol. "It polluted sports rights fees."

Indeed, CBS's baseball contract begot the NFL's $3.65 billion deal. Ebersol insists that NBC will remain on the sidelines during the next negotiations with pro football unless he can considerably reduce the network's risk of future loss and can recoup much of its estimated $100 million to $120 million in losses from the current contract. "We will not go forward unless we throw in every risk and the amount of dollars left over still leaves us room for profit," Ebersol says. "My bosses won't be thrilled to hear this, but I'd be happy with a 10-percent profit. You'll see us the next time out offering to pay a rights fee for way, way, way lower than the [proposed NFL] extension. Tens of millions. We won't ever make good on all our losses, but we have to try."

To skeptics who say he's only posturing, Ebersol replies, "Try me."