NCAA signs new TV deal despite financial losses

April 22, 2010
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The NCAA has a problem.

The golden goose laid an egg—and it wasn’t golden.

This year—despite Butler University's wonderful story—the NCAA’s broadcast partner, CBS, didn’t turn a profit on the three-week NCAA men’s basketball tournament.

What that means essentially is that CBS didn’t make enough in ad revenue to cover the huge rights fee paid to the NCAA and cover production costs.

The NCAA is eight years into its 11-year, $6 billion deal with CBS, which has broadcast the tournament since 1982. The NCAA has an opt-out clause that kicked in after this year’s Final Four, and is exploring expanding the tournament from 65 to 96 teams next year and bidding the package out for bigger bucks.

Jim Isch, NCAA interim president, was supposed to reveal the decision at an executive committee meeting April 29.

The problem apparently wasn't as big as once supposed, because this morning word leaked out that CBS and Turner have agreed to a 14-year, $10.8 billion deal to broadcast the tournament. NCAA officials are holding a 12:30 p.m. press conference reportedly to discuss the deal.

This development is most interesting. And this is why: Sources close to the network said CBS intended to ask for financial relief from the NCAA because the current/previous deal is/was heavily backloaded. If the NCAA does not opt out, CBS will owe $2.13 billion over the last three years of the deal.

That put the NCAA in a very tricky position. Either the Association sticks with a bird in the hand, albeit a bird that is likely to be squawking for more grub, or they re-bid March Madness on the heels of CBS’ revenue-loss revelation in the teeth of a still uncertain economy.

Apparently NCAA found a way to make this work for all concerned. The total package may be bigger, but I don't think it's likely the NCAA will be getting the $710 million annually over the next three years it would have under CBS' earlier deal.

Either way, cable cash is needed to prop up this deal. Cable stations benefit from two revenue streams—advertising and cash from cable company subscriptions.

ESPN was also eager to jump in the fray, but was shut out by the CBS-Turner alliance.

But Turner isn’t about to jump in for nothing. They want the Final Four on alternating years.

I can’t believe that people deride the Indy Racing League’s decision to move to the Versus cable channel, but there’s been hardly a peep about the NCAA moving its tournament games—including the Final Four—to Turner.

At least Versus has a mission statement centered on sports. Sure, Turner has done a solid job with the National Basketball Association, but they’re just as well known for airing cartoons and classic movies.

When the notion of tournament expansion was first reported in IBJ in December, the NCAA was looking for a more productive goose.

You can't blame the NCAA for grabbing at a bigger deal. After all, the cash from the men's tournament accounts for 98 percent of all the NCAA's revenue.

Still, you have to wonder about the wiseness of the NCAA's decision that essentially reduces the reach of its prized possession, and all the while praying those futuristic eggs don't turn out hollow for its broadcast partners.
 

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  • Just the beginning
    Welcome to the new economy. Spectator sports are going to have a tough way to go for the foreseeable future.
  • Tru who?
    What the heck is Tru-TV? Seems unlikely CBS/Turner will be able to drive more ad revenue out of this. Won't the ratings of the games be cannibalized since CBS/Turner will be airing 4 games simultaneously. Still lots of unanswered questions here, and I believe some serious miscalculations by CBS/Turner.

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