National sports networks scrum for U.S. ad dollars, viewers

Sat Nov 3, 2012 4:29pm EDT

* Disney's ESPN has many sports locked up for years

* But appetite for sports programming appears bottomless

* Advertisers hope for lower rates as networks multiply

By Liana B. Baker and Lisa Richwine

LOS ANGELES/NEW YORK, Nov 3 (Reuters) - Media companies from NBC and Fox to Al-Jazeera are digging deep into their wallets to build new national sports networks and grab a slice of the lucrative market dominated by Walt Disney Co's sports juggernaut ESPN.

The networks are chasing the big advertising dollars that flow into live sports programming, plus monthly subscription fees paid by cable operators that are far higher than those for other channels.

Just this week, NBC Sports Network outbid Fox for the rights to air England's Premier League soccer. The reported $250 million NBC will pay is more than three times what Fox had been paying.

NBC Sports Network is expected to be joined by Fox, which plans to convert its car-racing channel Speed to the wide-ranging Fox Sports in the third quarter of next year, according to a person with knowledge of the matter.

CBS entered the competition in April 2011 when it launched the CBS Sports Network with programming including qualifying matches of the U.S. Open tennis tournament, college basketball games and a Monday night football show anchored by former NFL quarterbacks who provide color commentary.

With more than $8 billion a year in fees and ad sales, according to SNL Kagan, ESPN remains the giant in the marketplace. The network has cable rights for many major sports events locked up for years.

But consumers' seemingly bottomless appetite for sports programming and advertisers eager for more live events is fueling the challengers, said Ed Desser, president of sports consulting firm Desser Sports Media.

"It sets up some very meaningful competition for second place" behind ESPN, Desser said.

NBC SPORTS NETWORK

The England's Premier League deal is intended to bring more viewers to the NBC Sports Network, a fledgling cable sports channel that will carry most of the English language matches.

Formerly known as Versus and the Outdoor Life Network, the network owned by cable giant Comcast Corp drew its biggest audiences this summer by airing Olympic events such as women's soccer but is grappling with a work stoppage in the National Hockey League that leaves it without a marquee sport.

NBC Sports Network is available in 80 million homes, and receives an average monthly fee of 31 cents per subscriber from cable operators. ESPN commands $5 per month and another 68 cents a month for its ESPN 2, according to SNL Kagan.

CBS began plotting its entry into the national sports derby when it paid $325 million in 2005 for the cable channel College Sports Television. Last year, it renamed the channel CBS Sports Network with the intention of creating a national sports cable channel.

The network is now in 50 million homes, up from 13 million subscribers, when CBS first bought the college sports channel.

David Berson, president of CBS Sports Network, says the channel intends to aggressively go after sports rights that become available. Getting more prize sports will allow CBS to charge more for the channel and expand to more homes, he said.

"Sports fans have a greater appetite for sports content and we intend to try to fill it," he says. "If something comes up we intend to aggressively bid on it, within the confines of what makes business sense for CBS."

Even Al-Jazeera, the top news network in the Arab world, is getting into the game stateside. Its 24-hour U.S. sports network "beIN SPORT" launched over the summer and has bought broadcast TV rights for soccer leagues in France and Spain. On Nov. 2, Time Warner Cable announced it will carry the channel, while Dish Network and DirecTV already have deals with it.

SPORTS JUGGERNAUT

Even before the rush of new 24-hour national sports channels, ESPN executives say they faced strong competition from broadcast and regional cable channels when bidding for rights. The network, seen in 98 million homes, has its major rights secured through multi-year deals with the NFL, Major League Baseball, Wimbledon and the big college football conferences.

"We like our position," said ESPN spokesman Chris LaPlaca.

The entrance of new players suggests more people "recognize what we have long known: the power of live sports, especially in light of technological advances, is substantial and brings tremendous value in today's entertainment landscape," he said.

To preserve their deals, ESPN and others are fending off competition by locking up rights early. ESPN last summer signed a deal to air college football's Rose Bowl until 2026.

The glut of sports channels seeking higher subscriber fees are certain to inflame tensions with cable operators who complain about the already high payments they are required to charge customers who don't watch sports.

Time Warner Cable and Cablevision held out for 10 years before they signed a carriage deal with the NFL Network. Customers of DirecTV and Dish were unable to see the Los Angeles' Lakers early season games because the satellite operators refused to pay the monthly $3.95 fee charged for two Time Warner Cable sports channels.

Major advertisers like General Motors, whose brands Buick and Chevrolet sponsor Major League Baseball, the NFL and NCAA basketball, are rooting for the rookie sports channels.

"It gives us more options to get in front of consumers," GM spokesman Tom Henderson said. "That creates a challenge for you because you have to then prioritize and make sure you're in the right place at the right time."

Advertisers see a potential home run if the proliferation of sports networks lower advertising rates as ad inventory starts to outstrip demand, said Sam Sussman, sports activation director at media-buying firm Starcom USA.

Having more games on TV means more viewers tune in to sports overall, but that average ratings per sports telecast could fall as audiences are split among competing events, he said.

"While choice is good from a buyer's perspective," he said, "I do worry about fragmentation and saturation."

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