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Original Issue


NBC took the NBA away from CBS for a cool $600 million

Dick Ebersol, president of NBC Sports, wrote down a set of goals before heading into a management meeting a few months ago. No. 1 on the list: Get the television rights to the NBA.

Ebersol thought that would be about as easy as holding Michael Jordan to single figures. CBS had owned the rights for 17 years, seemed loath to lose them, and has been pushing hard over the last 18 months to become the sports network of the 1990s. Since May 1988, CBS has committed $1.06 billion for the rights to major league baseball starting next year, and $543 million to broadcast the 1992 and '94 Winter Olympics. Most observers figured CBS would again dig deep to retain the NBA. So did Ebersol. In the margin next to his No. 1 goal, he wrote, "With God's help."

God must have been wearing his reading glasses. Last Thursday, NBC acquired the rights to televise the NBA for four years beginning next season. The deal will cost $600 million, a staggering 340% increase over the price of the current four-year package. NBC must also spend some $40 million to promote the league on TV and radio. Among the network's bells and whistles: a new Saturday morning TV show for children produced in conjunction with the NBA. NBC will air more games than CBS—at least 20 during the 1990-91 regular season, instead of the 16 CBS is airing this season, and as many as 26 a year thereafter. NBC also will carry one more playoff game each year.

Many industry watchers worry that such profligacy will blow the lid off TV sports and trigger yet another round of higher player salaries, labor disputes and increased ticket prices. Close attention will be paid to the upcoming bidding for the NCAA basketball tournament and the NFL. There is talk that TV sports has entered an age in which competition between the networks is so intense that they treat major athletic events as loss leaders, not profit centers.

That doesn't seem to be the case with the NBA deal, however. To be sure, NBC needed the basketball package. It was stung by the loss of baseball, and it had to show its employees, its viewers and its affiliates that it would continue to be a major player in TV sports. By landing the NBA, NBC proved that it will compete—and perhaps profitably. "We do not see this as a loss leader at all," says Ebersol. "We should break even at worst."

Ebersol believes that past NBA rights fees have been artificially low. "There has been no competitive bidding in this decade for that contract," he says. "Neither ABC nor NBC ever actively participated, so CBS has had it pretty much to itself."

Ebersol says that even at $600 million, the NBA may be a bargain. The league's TV rights went for only 57% of major league baseball's, yet about the same number of people watched last June's NBA finals as saw the 1989 World Series on ABC. NBC should attract even more NBA viewers than CBS did because it can promote games on its top-rated prime-time shows. CBS, which has been mired in last place in the ratings battle in recent years, hasn't had that promotional advantage. Neal Pilson, head of CBS Sports, said his network rejected the number the NBA suggested because the cost "was substantially more than we were prepared to pay."

Perhaps the amount it already had committed to other sports gave CBS pause. Another factor may have been the disappointing ratings for this year's World Series, which were released during the NBA bidding process. For CBS, which had outbid the two other networks by some $400 million for the baseball rights, those low viewer numbers must have been chilling.

Barring a recession—which could depress advertising revenues and send the networks reeling—the increases in fees should continue. But even with a healthy economy it will be tough for the networks to pass on those huge increases to advertisers. The day may already have arrived when the big, expensive sports events barely pay for themselves.

Viewers needn't worry, however. The networks like the steady audience that sports attract, and all three have money to spend. They reportedly expect record profits for 1989. NBC should earn about $320 million, ABC $200 million and CBS $100 million. Count on them to bring plenty of that to the negotiating table.



Despite the huge outlay, Ebersol believes NBC will at least break even on the NBA deal.