March Madness and the Final Four will remain the exclusive domain of CBS after the network retained the rights to the coveted NCAA men's basketball tournament with a record-breaking $6 billion rights deal announced last night that will run through the 2013 season.
CBS outbid both ABC/ESPN and Fox Sports to retain the tournament that determines the national championship of Division I college basketball. As part of the deal, the network also has exclusive rights for cable and satellite TV, radio, Internet, marketing, licensing, publishing, promotion, corporate sponsorship, merchandising and e-commerce.
CBS has carried the Final Four since 1983 and has had exclusive rights to the entire tournament since 1990. As part of the new deal, the network also has the rights to all but 19 of the NCAA's 81 national championships.
Under terms of an agreement that goes into effect in 2003, the NCAA will receive an average of $545 million a year from CBS through the 2013 season, compared to the current $215.6 million a year it averaged under terms of the old contract. The first year, the payment will be $360 million, with increases of about 6 to 7 percent a year. In announcing the dea last night, CBS Sports President Sean McManus said the network has no plans to put early rounds of the tournament on cable television and that the event, in its entirety, will be carried over free over-the-air television "for the foreseeable future."
In recent years, CBS has regionalized its basketball coverage, with production and announcing crews at every game. Games were aired in areas of the most obvious regional interest while also offering bonus coverage from around the country and marquee match-ups that were distributed to most of the country.
The NCAA tournament, conducted over a frenzied three-week period, has long been considered one of the jewels in the crown for CBS Sports. The network suffered a major setback last week when it lost the Daytona 500, another major event on its schedule since 1979, and industry sources said CBS was willing to bid whatever necessary to keep a tournament that has fascinated the entire country for most of the last three decades.
Sources said last night that Fox finished second in the bidding, and decided to bow out when it became obvious "the number was unreachable," according to one network executive. Leslie Moonves, president of CBS, said last night the network will make a profit from the new deal.
The final continues an upward trend in the rights fee marketplace. A combination of a still booming economy, ratings that remain strong for significant live events and advertisers still banking on the strong upscale male demographic sports traditionally delivers have driven rights fees to unparalleled heights in the '90s, with little sign of weakening.
The most recent NFL deal that went into effect in 1998 dwarfs all the others, an eight-year, $17.6 billion contract that runs out in 2006. But yesterday's developments placed the NCAA at No. 2 on the list, far surpassing the six-year, $2.4 billion deal announced last week that put NASCAR on Fox and an NBC/Turner Sports consortium starting in 2001 and running through 2007.
The NCAA gets about 90 percent of its budget from the current NCAA deals. NCAA President Cedric Dempsey said last night the organization's latest windfall will provide "new revenue streams" that will allow more schools to operate athletic programs in the black.
He said that currently, only 78 schools out of about 1,000 in the organization are generating more revenues than they expend. According to Dempsey, member schools will receive $151 million in the 1999-2000 budget.
College sports administrators around the country were delighted with the new CBS deal.
"But there are a number of appropriate ways to use the funds to the benefit of student-athletes," cautioned Maryland Athletic Director Deborah Yow, a member of the 10-person Division 1 budget committee. "Everybody will come out of the woodwork with ideas on how to spend the money."
In the Atlantic Coast Conference, Yow said, there is "a sentiment that sending the money to the schools is spending it for your student athletes. You'd be spending it for your women's programs, for additional scholarships, improvements to career support and academic improvement programs and improvements to basic services for student athletes. But this also will raise the question--and appropriately so--of stipends for student-athletes or a new way of calculating the value of scholarship."
The ACC received $6.5 million in the distribution for the past fiscal year, the most of any conference in the country; the Pacific-10 received $4.7 million. The payout also includes payments for academic enhancement, total scholarships and the NCAA's special assistance fund for needy athletes.
Back in September, when the NCAA ended its exclusive negotiating period with CBS and opened the contract to bidding, sports television industry sources expected the new deal to be worth $300 to $400 million annually. This is the first time the television contract has been "bundled"--with all rights to the event included in ther package as opposed to selling each individually.
McManus said he does not expect selling merchandise over the Internet to be a major portion of CBS's revenues from the new deal. Rather, he said in a brief telephone interview late last night, "eventually it will be a significant revenue producer for us. . . . when it becomes difficult to tell where television broadcasts stop and the Internet starts."
How Much Is That Game?
Average cost per year of television rights for sports and sporting events:
NFL $2.2 billion
Owners: Fox, CBS, ABC/ESPN
NBA $660 million
Owners: NBC, TNT/TBS
NCAA tournament $563 million
NASCAR $400 million
Owners: NBC, TBS, Fox/Fox Sports Net
Baseball $335.4 million
Owners: NBC, ESPN, Fox/Fox Sports Net
NHL $120 million
Sources: Street & Smith's Sports Business Journal, Associated Press
The escalating prices CBS has paid for the right to televise the NCAA tournament:
2003-13 Total value: $6 billion
(in millions per year) $564
1995-2002* Total value: $1.725 billion
1991-97 Total value: $1 billion
1988-90 Total value: $166 million
*renegotiation of previous contract
Source: Associated Press