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Original Issue


CBS paid $1 billion to keep the NCAA tournament

Like the jet planes in the old airline ad, the TV-rights fees for sports are going up, up and away. The latest stratospheric sum—the $1 billion CBS agreed last week to pay for exclusive rights to the NCAA basketball tournament from 1991 through 1997—raises a host of questions: How can CBS afford that kind of money? How will the colleges decide to divvy up the riches? And what does the deal mean for cable TV, which was supposed to be the sports ticket of the future?

For CBS there's method to this apparent madness. Last week's landmark deal, which obliges the network to pay the NCAA an average of $143 million a year, compared with $55.3 million annually under their current, three-year package, puts CBS firmly on the path to its goal of becoming the preeminent sports network of the 1990s. Mired at the bottom of the ratings in recent years, CBS recently, in effect, surrendered the NBA rights to NBC, which paid $600 million for a four-year contract that begins next season (SI, Nov. 20). Faced with a choice of keeping the NCAA tournament or the NBA, CBS apparently considered the college tournament a more cost-effective springboard to first or second place in the ratings.

Though the TV rights to major sports may cost major money—even $1 billion—CBS figures the huge outlays can be worth it. Because big sports events are such imposing promotional tools, CBS may be able to significantly increase its entertainment income by using time during sportscasts to hype its prime-time programs and thereby build larger audiences for them. And whereas the ratings for new sitcoms are at best unpredictable, a sporting event like the NCAA tournament is an almost surefire success when it comes to attracting an audience advertisers will love.

Enormous rights payments by CBS and NBC have sharply altered the economic faces of most major sports over the past 18 months. CBS has anted up $1.06 billion for major league baseball and $543 million for the 1992 and '94 Winter Olympics, along with the $1 billion for the NCAA tournament. NBC has put down $401 million for the '92 Summer Games in addition to the $600 million for the NBA.

Clearly, CBS president Laurence Tisch and the network's head of sports, Neal Pilson, have emerged as TV sports' big daddies. Have they overspent? Not really, Pilson says—and there's logic in his position.

Shortly after he took over at CBS in 1987, Tisch established what some observers described as a $3.5 billion programming war chest by selling off most of the company's nonbroadcasting assets, including the music and publishing divisions. CBS insists that the recent sports-rights purchases have been financed not by the subsidiary sales but by anticipated profits from the newly acquired sports programs.

Whatever the calculus, Pilson has spent lavishly on sporting events to create what he calls a 1990 "dream season." CBS will open with the Super Bowl and follow that with the Daytona 500, the World Figure Skating Championships, the NCAA men's basketball tournament, regular-season baseball, the Masters, baseball's All-Star Game, tennis's U.S. Open, baseball's playoffs and World Series, and, in all probability, the NFC regular season. In succeeding years, CBS should retain most of those events while adding the aforementioned Winter Games. Says the delighted Pilson, "We have achieved a dominance in sports that no other network enjoys."

The NCAA tournament attracts more total viewers to CBS than does any other sporting event or championship series. In 1991 CBS plans to televise all 63 games of the tournament. Under the agreement, CBS will also air the championship rounds of 15 secondary NCAA sports, more than twice as many as have been shown on over-the-air national TV before. Among the new offerings: men's lacrosse, wrestling and soccer; and men's and women's gymnastics, track and field and swimming and diving.

Now that Tisch and Pilson have committed such riches to the NCAA, the colleges must decide how to dispose of it. As CBS basketball commentator Billy Packer says, "If this money is used in any way except to improve the educational process, and instead just continues the process of winning at all costs, it could be very damaging."

The $1 billion could go a long way toward easing the financial crises that many college sports programs face, but it won't buy harmony. The 293 Division I basketball schools may soon be fighting over how the TV funds should be apportioned. Some officials have discussed determining a school's share of the loot on the basis of the graduation rate of its athletes. ACC commissioner Gene Corrigan says there has been talk about dividing the added revenues among those schools that are needy and have a wide variety of athletic programs.

The bidding for TV rights to sports has become so intense that event organizers, not the networks, often dictate the terms of agreements. This is certainly true of NCAA executive director Dick Schultz, who not only scored a financial coup in the TV deal but also got his way on other points as well. Schultz extracted a seven-year deal from CBS, which the NCAA says had proposed a four-or six-year contract. He got CBS to agree to televise all those secondary sports championships. And, significantly, he got CBS to more than double its annual rights fee while simultaneously agreeing to reduce the amount of beer advertising during games.

"I'm not sure beer advertising is the right thing to do," Schultz said. Accordingly, CBS next year will be able to run only 60 seconds of beer ads an hour, instead of the currently permissible 90 seconds. In addition, Anheuser-Busch has agreed with the NCAA that most of its ads will be of the know-when-to-say-when variety.

If CBS and the NCAA are the winners in the deal, ESPN, which for years has carried preliminary rounds of the tournament—indeed, built a national TV audience for those rounds where none had previously existed—must be the loser, right?

Yes and no. Other than the Olympics, this is the first major TV sports deal since the 1984 major league baseball agreement to exclude cable. Under the NCAA contract that ends with the basketball tournament in March, ESPN can carry 32 first-round games played over two days. Beginning in 1991, the entire tournament will be on over-the-air TV, and CBS won't sell any early-round games to the cable networks. This is a welcome development for fans. Those without access to cable—about 41% of the nation's TV viewers—will be able to watch such rousing first-round contests as last year's Georgetown-Princeton game. There will be an aesthetic benefit too: Tournament viewers won't have to put up with Dick Vitale any more (the incredible shrinking DV will appear only on regular-season and conference tournament games on ESPN and ABC).

Although ESPN isn't happy about losing the early-round games, the absence of the first two days of the tournament will hardly be a mortal blow. ESPN will still carry some 200 college basketball games a year, including most of the conference tournament finals, and it will be able to fill some program holes with spring training games in 1990 (ESPN will share regular-season major league baseball with CBS beginning next year). The tournament blackout of ESPN should not be considered ominous for cable TV as a whole. The three major networks should keep getting the big sports properties, and with prices as high as they are, CBS, NBC and ABC will need to sell off some rights to cable.

Contract talks for the rights to CFA College Football and the NFL will be held in the next few months, and negotiators for those sports can't wait for the meetings to begin. Neither can CBS. Though it has already spent a fortune, the network remains very much a player in this strange new game.