Sports And Rights Fees example essay topic

The steadfast rule when it comes to sports and rights fees is that it's the business of entertainment. The dollars are going to go where the value is. With Rights fees, networks pay fees to have the rights to a particular broadcast, for example march madness, the NFL or the Olympics. Rights fees are determined by the value a certain property holds, this is determined by the ratings. The most important ratings market world wide is undisputed ly the North American, and in particular the US market as we will later discuss with the Olympic media coverage. With in the US it is a battle field to increase ratings because of the dollar value associated with the opportunity to sell advertising and consequently the rights fees.

Personally I believe that 1.725 billion is a ridiculous amount for NBC to pay for the rights fees of March Madness. But obviously they are not mad. The economics and financial's behind their decisions to continually pay more and more is justifiable. Once again boiling down to the ratings.

The 70 hours of March Madness are extremely popular in the US and boast extremely high ratings. Therefore, advertisers are willing to pay the big bucks to get their ads on the air. The same is true about the Superbowl, with 30 second advertising sports reaching astronomical highs networks are lining up to buy the rights fees for the event. As Bill Brown the senior vice president of Fox Sports stated", we want entertainment... we want to televise the teams that will deliver us the highest ratings". That truly summarizes the essence of sport media today, and why rights fees are working. "Fox, paying MLB about $417 million a year in a deal", which expires next year.

With baseball's popularity on the rise again the rights fees for the league are undoubtedly going to increase. But as the numbers have shown the Fox network is the big spender when it comes to rights fees, dispensing $2.5 billion from 2001 to 2006 on MLB alone. While Fox has a hold on baseball, Time Warner and ABC / ESPN seem to be focusing their dollars on the NBA, both handing over just over $2 billion over a 6 year period. But as aforementioned the rating speak volumes and while the NBA is very popular in the US, from a network point of view March Madness, NCAA basketball is a winner. CBS is paying $6.2 billion dollars over a 12 year period to ensure their TV rights.

As this is one of basketball's major properties and wanted by advertisers who are trying to target a very specific demographic. However, there is a problem with increasing rights fees being paid by networks, funds are not bottomless. At a certain point the sports industry will plateau and as we are seeing financial resources are being pulled from sports with lower rating to finance the network's bid for the highly rated events like the Superbowl. This is also known as a zero sum industry, where one event / league will benefit while another suffers. The NFL is currently taking in about $550 million / year from 4 different networks respectively. The price tag is not that high because of the extensive amount of game air-time, but because of the perceived value.

Networks are teaming up with their own programming to compliment the short NFL season to bring in more ad spots and rightly so. The NFL as a league also knows the value of their product and realizes that networks are still willing to pay these incredible rights fees. After all the networks are already paying twice as much as their last contracts. However, who suffers in the zero sum game? The worst case or ratings influencing the general public lies within Canada and amateur / university level sports being dropped from the schedule due to poor ratings and unpromising commercial dollars.

However, rights fees are also a source of funding for many college level athletics, at least in the US, as ESPN's rights fees have helped fund many programs including minor level and women's sports. Yet, on the international level rights fees have played an important role since the mid-1980's. Rights fees have become an integral part of the revenue stream from many not-for-profits such as the IOC. The majority of the advertising revenues generated during the Olympics are US based (92%), one of the reasons behind altering the summer / winter Olympic schedule to separate two year periods. By giving US advertisers a staggered Olympic schedule more dollars were made available for sponsorship and advertising and thus rights fees. It was reported that NBC paid $793 million for the rights to the Athens Olympics.

The increase from the Sydney figures can be attributed to the favorable time zone and for the fact that European Olympics have historically had much better viewer ship / ratings than the Asian ones. In fact the NBC's coverage was totaled at 1,210 hours between all their affiliated networks, something quite unprecedented to date". The IOC sells their broadcast rights for billions of dollars to finance the Games and support their various sports governing bodies... ". It began in 1948 with the BBC paying the equivalent of $3,000 to broadcast the games. Similarly to US network television and league rights like the NFL, the network who purchases the Olympic rights can then recoup their outlay by sell air time to major sponsors.

This has become a quite lucrative venture for networks and is a significant turnaround from the pre LA Olympics. In fact rights fees are the single biggest source of revenue for the IOC. But the wealth isn't soul for the IOC, NBC made approximately $900 million in advertising revenue at the Sydney games after paying the $705 million rights fees. On a personal level I think the value of the rights fees are a reflection of the general public deep down. Sport is a business and they are there to make a profit at the end of the day.

The important thing is that we the public are able to access sports and hopefully it will promote sporting activity and a healthier lifestyle, at least. Having looked at the numbers, yes, the NFL's rights fees appear to be verging on craziness. However, it is the US's most popular sport. So let them raise those rates, but what are the consequences?

Where will all the money come from to pay the rising costs? The sports that are suffering are those with the lowest ratings, with less entertainment value and those who fail to attract the advertising dollars. From a Canadian perspective it's hard to imagine that poker has similar ratings to NHL hockey in the US, but that's reality and one that networks deal with. So is it the US who's going to determine what sports are popular in the future as they hold the rights fees to many international competitions.

In Canada, will Rogers play the same role? These are some of the questions that could be discussed and should be watched, especially with the onset of the Vancouver 2010 Olympics. Rights fees in general are a good thing, but when they get out of hand they can be their own worst enemy. The positive side is that funding is being secured to ensure that games such as the Olympics have secured sources of revenues and that rights fees are being funded back down to the amateur sports levels. While live television is by far the most valued property, with new technology new forms of delivery are emerging. Fans who have photo capabilities and with the advancements in wireless capabilities could in fact broadcast the games themselves in the future.

So the leagues have to protect the value of their properties. The internet is more accessible to the public in remote areas of the world, such as Fiji., and should be exploited but properly. Some leagues charge for web broadcasts while others have found ways to avoid the fee. The IOC also needs to tackle the issue and most leagues if plausible might follow the example set by the NFL. Although I may wish that certain sports receive more money from their rights fees, it boils down to a popularity contest and a business decision.

While I may feel that the NHL should receive more money there are facts and ratings that argue the contrary. In respect to rights fees I believe that the NHL is going to suffer because of the strike. They will not loose their coverage or contract with ESPN but with more dollars going into popular US sports such as football there will be less money for the NHL, and justifiably so from a business perspective. The only way to change the situation and for the sports with lower rights fees to increase their "take" is to increase viewer ship and popularity and that comes down to increasing popularity at the grassroots level and demand / rating will grown from there. In most cases it won't happen overnight, but as the gap in ratings grows between the class A and B sports so do the rights fees and consequently the sponsorship dollars.