NFL sacks networks for loss
Fox's decision to let Madden go to ABC shows economics of sports broadcasting are changing.
March 1, 2002: 9:04 a.m. ET
A weekly column by Staff Writer Chris Isidore

graphic NEW YORK (CNN/Money) - Anyone who doubts that broadcasters are getting tired of paying big dollars for sports programming and then giving it away to viewers should try watching John Madden on Fox.

He's no longer there.

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Fox, which had the former coach and colorful football analyst under contract for one more year at a reported $8 million, let Madden go this week so he could jump to ABC's Monday Night Football.

Fox wouldn't comment Thursday on whether economics pushed the decision, but in comments before last month's Super Bowl and in its fourth-quarter earnings report the company detailed huge losses caused by the high fees it pays for sports and a weakened advertising environment.

Fox Entertainment Group Inc. (FOX: Research, Estimates), which reportedly is paying the NFL $4.4 billion for eight years of games, took a $387 million charge for anticipated losses due to its National Football League contract, along with a $225 million charge on baseball and $297 million on Nascar races.

Fox was willing to let John Madden head to competitor ABC if it meant shaving losses for its NFL programming.
Those are three of the nation's top four sports in terms of viewership, and despite a slide in most sports ratings, football still gets more eyeballs than just about any other show on Fox. But Fox Sports President Ed Goren conceded before the Super Bowl that viewers alone are no longer enough.

"Unless the economics change a bit, there's troubled seas ahead," Goren said in a press call last month. "There's value there. Television sports is very healthy as far as viewership. But at some point a bean counter is going to say, 'Yes Ed, we understand that, but at what price?'"

Cost cutting at Fox Sports reached such a level this past season that the network dropped its virtual first down line from broadcasts to save $50,000 a week until it could find a sponsor for the special effect.

Goren echoed statements by Dick Ebersol, his counterpart at NBC Sports, that broadcast networks dependent solely on advertising revenue no longer can compete with cable networks, which get both advertising and subscriber fee revenue. With 83 percent of the nation's television households now hooked up to cable or satellite television, sports on cable is on an almost equal footing with broadcast networks in the eyes of advertisers.

"Our cable operation is very healthy, as is ESPN," said Goren. "The network operations are on a different model. You can make an argument there are only two healthy network sports operations."

ABC Sports President Howard Katz pointed to the ability to use Madden on ESPN as one of the reasons for doing the deal. "The combination of ABC and ESPN really helps these corporate decisions," he said. "The fact that John can render some services to ESPN makes it an easier corporate play."

  graphic OTHER STORIES  
  • Madden leaves Fox for ABC - Feb. 28, 2002
  • News Corp. profits fall - Feb. 12, 2002
  • SportsBiz: Are you ready to pay for some football? - Jan. 25, 2002
  • SportsBiz: An Olympic bite on football ad sales - Dec. 18, 2001
  • SportsBiz: Fans' bottom-line loss - Oct. 16, 2001
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    Madden rarely appeared on Fox Sports Net, which has less national sports coverage than ESPN. Even with his cable work, Madden will get $3 million a year less from ABC than he did from Fox, although his value as a product endorser likely will rise. Monday Night Football, after all, remains ABC's highest-rated program.

    The slowing U.S. economy has hurt the overall advertising market, and sports advertising has been particularly hard hit, said Jeffrey Logsdon, an analyst with Gerald Klauer Matttison & Co. He also believes sports advertising may take longer to bounce back.

    "There's a glut of sports programming out there," Logsdon said. "It's all going after male viewers age 18 to 49. To reach other demographics, you have to spread your buys around."

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    In January the National Basketball Association signed a new deal with ABC and ESPN, taking many of the games formerly shown on NBC and putting them on cable. The NFL has vowed to keep its games primarily on free television. But that decision may not be the NFL's to make for much longer. The broadcasters will throw the ball away rather than continue taking the sacks. graphic

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