NEW YORK (CNN/Money) -
If baseball is hit by the sixth players strike later this season, the biggest loser might not be the owners, the players or even the fans, but Fox Entertainment Group Inc.
This might seem counterintuitive at first blush. The network and movie studio company that has the rights to the sport's World Series and many of its playoff games took a $225 million charge in February. That covers what it estimates it will lose paying $2 billion in total rights fees to baseball this year and during the next four seasons.
If Fox were to suddenly get a nine-figure refund from baseball from the postseason being canceled the way it was due to the 1994 strike, it would seem to be at least a temporary way to stem the losses.
But the truth is, despite cries of how baseball isn't that popular any more and how rights fees have gotten too high for broadcasters to make a profit, a well-watched World Series is still a likely money maker for the company.
The network side probably booked a loss even on last year's well-watched seven-game Series. But the lift for the local Fox affiliates owned by the company probably made the post-season, especially the World Series portion, profitable for the company overall. And some of the lower rated post-season games, those in the first round, have been shifted to ESPN this year as part of the sale by Fox (FOX: Research, Estimates) of its Fox Family network, which carried the games last year, to Walt Disney Co. (DIS: Research, Estimates)
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Even a World Series featuring the small-market Minnesota Twins would be better for Fox than no World Series at all. |
Fox faces a much greater loss if the sport is damaged long-term than it could hope to recoup in rights payments refunds from cancellation of the Series. That's because no company has greater exposure to baseball's triumphs or setbacks.
Besides the national baseball television contract, which has another four seasons after this one, Fox Sports Net has contracts to show local regular-season broadcasts of 25 of the league's 30 teams. The company also owns the Los Angeles Dodgers, which has a shot at the post-season and its first World Series appearance since 1988.
The expected fan backlash against the game, if there is another strike, therefore could hurt Fox results for years to come. The Fox national TV contract has a clause that will reimburse some money if a work stoppage hurts fan interest in the game. But again, that's unlikely to make up for the loss of ratings and revenue locally and nationally that would occur in reaction to a strike.
Perhaps the worst-case scenario for the company would be a strike that lasts long enough to anger many fans but which ends in time to allow a badly-damaged post-season to take place.
Fox, of course, says it wants to see the postseason played.
"I've not had anyone at the company tell me we're rooting for a strike," said Fox Sports spokesman Lou D'Ermilio.
Even if the World Series turned into a money-losing four-game contest between small-market teams from Minnesota and Cincinnati, Fox is not better off without the games. It has already locked in the start of some of its new season programs to after the end of baseball postseason. Moving those shows' debut up if the games are cancelled will be difficult due to advertising commitments.
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"What I've been told by counterparts at Fox broadcasting, is that they have a contingency (if there is no post-season), but at this point they are keeping them to themselves," said D'Ermilio.
And even the most popular Fox programs probably won't get the ratings of the least viewed World Series games. The lowest rated World Series game of modern time was Game 1 of last year's contest, which was watched in 10.4 percent of U.S. homes with televisions. That still would be a great showing for Fox, which saw its top rated entertainment show, "Malcolm in the Middle," pull an average 7.2 rating.
The network's regular-season National Football League broadcasts, its best rated program, pulled an average 9.6 rating.
Even those analysts who believe Fox is paying too much for baseball rights think that the World Series is probably still a winner.
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"If the Series is two large-market teams, like the Yankees versus the Dodgers, aggregate revenues would easily exceeded rights fee payments," said David Miller, analyst with Sanders, Morris & Harris, a Los Angeles brokerage firm.
If you listen to baseball Commissioner Bud Selig and critics of the game, the biggest problem facing it right now is it's a long shot at best that a small-market team can make the Series. The Minnesota Twins is the only small-market team in good position to make the playoffs right now, and the team would be considered an underdog in almost any playoff.
But no matter which teams make the Series, its ratings, and Fox's profits, depend on the best-of-seven contest going to an exciting Game 7. A network's dream NY-LA match-up that results in a four-game sweep will hurt Fox much more than two less popular teams batting into extra innings of Game 7, as was the case with the '91 and '97 series.
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