CBS Has Lost $500 Million On Baseball Contract
LONG BEACH, Calif. - Compared to the last television baseball contract, Custer's Last Stand was a garden party.
CBS paid Major League Baseball $1.06 billion for four years of baseball (1989-1993), and it has already taken $500 million in losses because of poor ratings and the recession-wracked advertising industry. ESPN, which signed a four-year, $400 million deal, has taken $200 million in losses.
Obtaining baseball was a tool for CBS at the time, a device to assure affiliates the network was staying in business and, between the playoffs and World Series, provide a two-week prime-time ratings win. CBS achieved its goal, but at a price it didn't expect.
"Baseball has given us much help in returning us to the No. 1 position in prime time," said Neal Pilson, CBS Sports president. "But on balance, if we had to do it again, we would not have paid the price. We didn't gauge the changes that occurred in the marketplace."
Or baseball's slide. Since 1982, regular-season ratings are off 48 percent and playoff-series ratings 41 percent. Even the hallowed World Series has been affected. The 1992 match between Toronto and Atlanta was the second-lowest rated Series in history, averaging a 20.2. The only lower ranking is the 1989 match that was interrupted by the San Francisco earthquake.
Baseball is being asked to adjust and take a 40 percent to 50 percent cut in TV money, or back to the rate of the previous contract. Combined, CBS and ESPN paid an average of $365 million per year the past four years. The previous contract (ABC/NBC, six years, $1.1 billion), averaged $183 million per year (and $6.5 million per team).
Network projections, in light of the recent losses, seems logical, but baseball is fighting it like a fastball on the hands. It did not answer CBS' two pleas for financial relief from the contract, intent to get full value from the deal despite CBS' plight, and is challenging the size of the losses.
David Alworth, baseball's director of broadcasting, said the TV committee acknowledges TV's losses, "but whether those numbers are exactly accurate, it's difficult for us to determine."
Alworth "doesn't want to agree" that a 50 percent cut is needed, and finds some encouraging parallels between today and 1989, when CBS bought baseball.
"Look at the position CBS was in," he said. "They needed major properties to help them get out of third place and did it with baseball and other events. That was their strategy. The market had changed. Now it's ABC at the top with NBC third. There are different drivers with different needs. They'll determine what it's worth."
Baseball seems determined to hold on to what it has. "Baseball doesn't pool its revenue, so it's important they don't lose their national TV dollars," said Dennis Swanson, president of ABC Sports. "It's a constant they've come to count on."
If there is indeed a 50 percent cut, the game may be faced with money-making options it has mentioned quietly among TV officials but backs away from publicly - another tier of playoffs and interleague play.
Alworth said both concepts are not being considered for short-term TV revenue gain, but that they are being studied by the game's TV committee as part of the game's future development.
Whatever the case, another tier of baseball playoffs is of no apparent interest to the networks. Interleague play on a cable outlet (HBO has expressed interest), besides changing the game dramatically, would further strain the relationship with the networks.
CBS has had difficulty selling out its playoff ad spots as it is and received horrible ratings for daytime playoff games. "We're not interested in another level. We've had difficulties selling the playoffs in the current format," Pilson said.
"It doesn't mean they won't find a buyer. It could be cable. But it is not an automatic revenue generator. It will further dilute the playoffs."
Cable is a bit soft on baseball, too. ESPN recently paid $13 million to buy its way out of a two-year option on its contract, which also expires after 1993. The cable network plans to cut back the number of games it airs this season.
"The whole baseball scene continues to be volatile, a mystery," said Dick Ebersol, NBC Sports president. "Whereas the vast majority of NFL owners understand what's happened to TV rights, I don't think baseball owners do.
"There's nothing on the horizon that can keep baseball from taking a major cut in the next TV deal."
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