The National Basketball Association Board of Governors adopted last month a proposal that might fundamentally alter the future of the professional game - not the three-point field goal, but a little-not change inn the league's policies toward television.
The league has chosen to broadcast some of its games on cable television at a time when its CBS ratings are declining.
Major league baseball, enjoying better ratings, already has chosen a similar course. But baseball's booming attendance and relatively Iucrative local broadcast contracts make it less dependent on network revenues.
For the NBA, network revenue - be it from CBS, cable, or both - is a matter of survival.
Backers of new NBA policy, including Commissioner Lawrence O'Brien and television adviser George Faust, have come to realize that the television sports industry is undergoing radical changes and that all sports will have to make adjustments to the new realities.
The lengue's attempt to come to grips with its television problems - problems that are greater than the National Football League's but certainly less than those of hockey, soccer or tennis - offers an instructive lesson in the complexities of the television-pro sports relationship.
Until recently, life seemed very simple in television sports. It was, some observers said, a business marriage made in heaven.
ABC, NBC and CBS bid against each other to buy the broadcast rights to certain events and make their money - millions of dollars a year - by selling commercial time to advertisers.
The idea has always been to pay less for broadcast rights than can be recovered from advertisers. As long as ratings rise, so will advertisers'support and network income. The reverse is usually, but not always, true.
The advertisers, in turn, cheerfully pass along their costs (and then some) to consumers. We all pay the price of network television at the cash register.
Two years ago, the NBA sold its broadcast rights to CBS for a long-term, lucrative contract that currently pays each team more than $1 million per year. By compariison, each NNFL franchise receives $5.2 million a year from TV before selling a single ticket or hot dog.
The NBA-CBS contract, which has three years to run, already is a source of some concern to both parties, because ratings for the NBA Game of the Week have begun to erode, and any continuation of the trend will make it difficult for CBS to charge advertiserss top dollar. Should this come about by the end of the current contract, CBS will have less, if any, interest in renewing the contract - and only would do so for less money.
It is this unpleasant possibility that concerns the NBA. All of its franchises need at least the current level of CBS money, and some of the already marginal franchises have used it as collateral against which to borrow even larger sums. Should the CBS money dry up and not be replaced, franchises would fail.
CBS almost certainly will honor the remaining years of the current contract. For one thing, network sports departments prefer long-term contracts, which tend to return the greatesst profit in their later years, since the original rights fee remains unchanged, while price increases and inflation subsequently drive up advertising rates.
And CBS certainly is making money.One network executive told me that last year the NBA provided CBS a larger percentage profit than any other regularly scheduled sport on any network. There is also the question of what substitute programming CBS could put on Sundays during the first and second quarters of the year.
The NBA provides the program continuity advertisers crave, and there are no other winter alternatives except hockey, which already has bombed on more networks than Don Rickles.
CBS has other options, of course, such as developing a new sports program or, heaven forbid, giving the time back to the affiliates. The later idea is regarded by network executives as only slightly more outrageous than giving New York back to the Indians. The affiliates, many of whom dislike both the NBA and New York, would be delighted should either of them come to pass.
So O'Brien and CBS, while hoping for the best, are begining to draw up contingency plans. For O'Brien this means cultivating potential alternatives to replace or augment CBS. Since neither ABC nor NBC is interested, this means the NBA must turn for a national broadcast package to one of the emerging new technologies which are altering the broadcast landscape - in this case, cable television.
Among the alternatives are "supper-station" - made famous by Ted Turner's WTCG, in Atlanta, which by setting up its own satellite distribution system, has enabled luckly cable viewers throughout the country to watch Atlanta Braves games.
Then there are the "bad guys" of cable - those operators who "import" (TV and sports executives prefer the term "steal") a station's off-air signal and retransmit it to their own paying customers without paying direct compnsation to the station whose signal they "import."
In addition, there is the distinctly different system of "pay cable" under which a program distributor like Madison Square Garden Productions puts together a package of Garden events and sells it to cable "affiliates" without involving a TV station.
And finally, there is Subscription Television (STV) which is essentially "pay cable" without the cable. Subscribers pay a monthly fee and receive a decoding device that enables their TV set to show programs that remain electronically scrambled and unwatchable in the homes of nonsubscribers.
The future holds even more technical marvels, including direct satellite-to-home reception.
the trouble with all these spanking new systems is that compared to the national networks, only a tiny fraction of the population can receive them, so comparative ratings are very low. In addition, the national ratings services have been unable to accurately demonstrate to advertisers the size or makeup of the audience.
For example, Turner, despite all the publicity WTCG has received, has had to fight and scratch to get national advertisers' support. This is about to change, however. In a move of major significance to the entire industry, one of the nation's largest advertising agencies is set to announce a "very big deal" with WTCG, probably tapping for the first time the big national clients Turner has predicted would eventually come to him.
Turner, who has a huge advantage due to his "vertical integaration" through owership of both the TV station and the teams (Atlanta Hawks and Braves), has set an enviable example for other NBA owners, who would love to cash in on the same kind of deal. The opportunity is being presented to a number of them, because other superstations have sprung up in Los Angeles, San Francisco, New York and Chicago - with more on the way.
To be sure, many sports executives do not understand the pitfalls and complexities of these broadcast technologies, and are liable to get burned in pursuit of riches, real or imagined.
My research has indicated, however, that an NBA franchise reaching 700,000 viewers who pay $7 a month to watch all the team's games, would makes as much TV money as does the entire league today. No wonder so many franchises, particularly the older, big-city ones, want a piece of that action.
Research also indicates that should these franchises set up their own national cable networks, it would destroy the NBA as we know it today. There simply is not enough audience or money out there to support more than a few such systems. Those lucky few would be greatly enriched at the expense of all other franchises, some of which would be unable to afford the competition, and would fold. A number of the larger franchises would shed no tears at the prospect of weeding out some weak sisters.
One person emphatically opposed to this is Commissioner O'Brien. In cooperation with his television advisers and the owners' television committee headed by San Diego's Irv Levin, O'Brien developed a plan to prevent individual franchises from setting up cable networks, while at the same time committing his office to negotiate a league cable package for the coming season. The revenues from this package are to be fully shared by all teams.
This is the proposal approved at the recent Board of Governors meeting, and it may set in motion market forces beyond the NBA's control.
At present, the NBA is negotiating with two cable distribution companies - Madison Square Garden Productions (MSG), which is backed by film giant United Artists-Columbia; and Entertainment Sports Programming Network (ESPN), 85 percent owned by Getty Oil.
ESPN will begin transmitting 24 hours a day sports on Dec.1. The NBA is asking for a prime-time game of the week, for which it would receive a token rights fee and a share of advertising revenue.
As cable penetration increases over the next three to five years, advertising revenues should grow markedly, thus greatly increasing the NBA income. However, industry sources estimate the NBA's total income in the first years at $10,000 per game - a pittance when divided among the league's teams, and no more than several franchises already make from local station contracts.
MSG appears to have the inside track but ESPN has something up its sleeve. It was announced this week that Chet Simmons, president of NBC Sports, will leave that network to become president of ESPN. Some NBC on-air personnel are also expected to make a switch to ESPN, with Joe Garagiola and Bryant Gumble the most likely candidates. Another strong possibility is ABC's Don Meredith.
In any case, the NBA appears to be on the right track by controlling its franchises, limiting their broadcasts to a 75-mile radius, centralizing national cable policy and revenues, and establishing a national package as a hedge against the lessening of CBS's ardor. Right? Maybe.
There's a Catch-22 to all of this. It will be several years, if ever, before cable television will be able to compete with CBS's ability to pay national rights fees. Therefore, it would seem prudent that the NBA do nothing to alienate CBS or diminish its interests in renewing the current contract at a still higher price.
However, the NBA's cable strategy might turn out to be counterproductive because it creates two considerations displeasing to CBS.
First, by placing another national package on a competitive medium, it must to some extent devalue the formerly exclusive CBS pitch to advertisers, and it further aggravates the problems of low ratings and overexposure. Second, MSG or ESPN would pursue the same type of national advertisers currently supporting CBS. The alternative system of permitting individual franchises to set up their own networks would be less bothersome to CBS because they would draw support from local or regional advertisers, thus leaving the national advertisers to the network.
So while O'Brien is forced to limit the spread of individual franchise networks that threaten the survival of some teams, he is thereby creating a national cable package, which potentially may grow at the expense of CBS, whose money supports the entire league.
Sources close to the commissioner have told me the NBA really is doing CBS a favor by limiting the told number of games franchises would other wise place on the air. A CBS officia reacted to this argument by saying "It's a little like asking us to be grateful for swine flu shots, which are more likely to make us sick than the disease."
It is important to remember that, with inflation, it will cost $30 million per year by 1982 to equal today's level of CBS support to the NBA; any rights fee increase will be additional. It is unlikely that cable television will be in a position to provide those sums in three years, or longer. A CBS cutback would be followed by a gap of several years before cable could come to the rescue. In that period, there would be hardships and, I believe, failures.
O'Brien and the NBA may be between a rock and a hard place, but it emphatically is not his fault. He inherited a league swollen by expansion, hooked on television revenues, and plagued by accusations that the players are too rich, too disinterested, and too black.
The big-city teams have had dismal records, and purists say the caliber of play throughout the league has dropped. Players' salaries have risen to the point that some franchises are hard pressed to meet the payroll.
Television did not create these problems, but it certainly has given them a national audience. To his credit, O'Brien, who previously had worked in public relations, presidential politics and the cabiner, has applied his considerable political instincts and management skills to the job of strengthening the league. His office has spent more than $200,000 on consulting firms in an attempt to solve some of the problems.
More importantly, he is working to secure the broadcast foundation on which so much of the NBA rests.
Ironically, if the NBA does nothing, it might still lose CBS revenues in three years. But by preparing now for that unhappy possibility, the NBA might unintentionally bring it about. CAPTION: Illustration, no caption, By William Coulter for The Washington Post