The NHL's television ratings may be struggling, but the Walt Disney Co. is confident it will turn a profit on its new $600 million, five-year television contract.
The deal, announced Tuesday, gives the NHL 2.6 times more money than ESPN and Fox Sports paid under the current contract that expires after this season. ESPN is paying $350 million for the cable rights and $250 million for the broadcast rights, which it is putting on ABC Sports, also owned by Disney.
"We will make money on this deal," said Steve Bornstein, president of ESPN and ABC Sports. "We believe through exclusivity and cross-promotion that we will be able to increase ratings and ad rates."
Improving ratings enough to make money will not be as easy as cross-promotion. Assuming ABC gets the maximum number of games allowable in the contract, it would need to average more than $50,000 for each commercial spot to break even. According to advertising sources, Fox was able to charge $45,000 for its one Stanley Cup finals game and considerably less for its regular-season games.
"Maybe Disney knows something that we don't know," said Ron Frederick, a media buyer at J. Walter Thompson advertising agency. "On the face of it, it looks like too much money. Why take a loss on low-rated sports? There are lots of justifications on high-rated sports."
ABC will show 4-7 regular-season games, six playoff games and up to five games in the Stanley Cup finals. ESPN will produce the broadcasts, but there will be a different look, and maybe different announcers, on the two networks. "But there won't be a glowing puck," Bornstein said in reference to Fox.
While the network package jumped 61 percent, ESPN is paying five times as much a year for the cable package of up to 200 games. ESPN is getting 26 additional late night games on ESPN2 - meaning more broadcasts of the Disney-ownd Anaheim Mighty Ducks - and exclusivity on all 27 of its broadcasts on ESPN, eliminating local blackouts.
ESPN also will have exclusivity on four additional playoff games, rights to more than 100 games for ESPN International, programming for ESPN Classic Sports and use of footage at ESPN's restaurants and stores.
"All of television is fragmenting, but we believe sports is fragmenting less," Bornstein said. "Our ability to cross-promote and complement coverage across our many lines of business will drive up viewership."
The deal is a coup for the NHL, who many experts predicted would have a difficult time matching its previous deal much less becoming the third major sport in less than a year to more than double its national TV revenue. But commissioner Gary Bettman disputes the notion that Disney overpaid.
"I did not go into negotiations with a mask and a gun," Bettman said. "This deal works for both sides even if we show moderate growth. It will be terrific for ESPN and ABC if our growth increases in the future."
Hockey's growth on U.S. television has stunted recently. Fox's ratings have fallen 33 percent since 1996. ESPN's regular-season ratings fell 13 percent last year and ESPN2's were flat compared to 1996-97.
" Hockey has a group of devoted fans but it has never made it on television," Frederick said. "Football fans will watch two teams they don't have an emotional stake in. Hockey fans only watch their teams. That's one of the problems."
Bornstein and Bettman were quick to trumpet hockey's favorable demographics, but ratings among men 18-34 have fallen 41 percent in four years. Both attribute the fall to the Olympic break disrupting the season and putting the playoffs concurrent with the NBA and poor performances by teams in major markets like Chicago and New York.
Fox, which owns the local rights to 19 of the 20 U.S.-based teams, is less bullish on the national future of the sport. The network is projecting losses of $20 million this season and met with the league Monday about opting out a year early. No decision has been reached.
"At this point in time, we will be covering the NHL in the final year with all the enthusiasm, verve and flair we given the telecasts in the past," said David Hill, president of Fox Television.
Fox's decision not to pay the $225 million necessary to match ABC's deal was supported by 95 percent of its affiliates, according to industry sources. But ABC is not concerned about negative reaction from its affiliates.
"I assume they will view acquiring a major sport as a positive," said Robert Iger, president of ABC Inc., "particularly with the final coming in June, when the network has had a problem developing strong original programming."
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