CBS, TW to share March Madness rights
14-year deal will run 2011-24, valued at over $10.8 billion
CBS will share broadcast rights to the NCAA men's basketball tournament with Time Warner cable networks for 14 years under a $10.8 billion TV, Internet and wireless rights deal unveiled Thursday. The NCAA said the March Madness pact with CBS Sports and Turner Broadcasting System begins next year and runs through 2024. The partners outbid Disney's ESPN. Fox Sports originally looked at whether it could structure a bid that would work financially but left the process. Comcast's Versus also was rumored to be looking at rights.
Turner and CBS have worked on sports packages before, and the two began discussing a joint NCAA bid in October.
The agreement sees Turner share in the tourney in return for helping CBS bankroll the cost of the annual college hoops extravaganza, on which CBS is believed to have started losing money amid rights-fee increases built into the network's previous 11-year, $6 billion deal that ran through 2014.
Escalating payments during the final three years, estimated at about $2.13 billion, would have put increasing financial pressure on CBS, which was expecting significant losses for those years. Now, CBS is expected to see bottom-line benefits starting next year from the reworked arrangement, with Sean McManus, president of CBS News and Sports, saying the new deal will be profitable from Day 1.
Turner, which will air a majority of games, also projects that it will reap profits from the arrangement with coverage on TBS, TNT and TruTV. It expects benefits from higher cumulative ratings, from selling the tournament across three networks and possibly from higher carriage fees for its networks.
CBS Corp. CEO Leslie Moonves and TW chairman and CEO Jeff Bewkes and their finance teams were key to approving terms of the arrangements as media giants increasingly have looked to ensure that they make money on expensive content deals.
CBS and Turner execs also expressed interest in potential additional NCAA rights when current contracts with ESPN expire.
"It looks like CBS and Turner partnered to pay up to keep ESPN from approaching a monopoly on TV sports rights," Miller Tabak analyst David Joyce said.
An ESPN spokesman said: "We made an aggressive bid and believe our combination of TV distribution, digital capabilities, seasonlong coverage and year-round marketing would have served the interests of the NCAA and college fans very well."
The NCAA deal follows TBS' recent coup of signing Conan O'Brien for a nightly 11 p.m. show. It is the latest piece of evidence that TW, led by Bewkes and CFO John Martin, is making good on its promise to invest in popular content that is projected to ensure good returns.
"For Time Warner, the deal dramatically strengthens one of our most important businesses for a relatively modest cost, and it's perfectly consistent with our belief that reinvesting in our content and our brands is our highest-return opportunity," Bewkes said in a staff memo obtained by THR.
The agreement also ensures that the NCAA gets its long-stated goal of showing all games live on TV, and it eventually will bring Final Four games to cable for the first time.
Cable and broadcast networks have long competed for programming, but the NCAA deal shares broadcast rights between players on each side. It allows CBS to keep parts of the tournament -- which has been one of its core sports properties since 1982 -- on broadcast, while also making TW's cable networks unit a bigger sports player. TNT has been the home to the NBA playoffs, and TBS carries Major League Baseball regular-season games, divisional playoff games and one of baseball's two league championship series.
Turner and CBS will collaborate on selling advertising for the tournament.
The partners didn't detail the financial splits (from the division of rights costs to ad and sponsorship revenue splits), but sources said Turner will shoulder a bigger portion of the $10.8 billion rights costs. The two will split production costs and ad revenue, with TW also expecting to benefit financially via higher affiliate fees.
Should the tournament turn a loss, CBS' annual maximum red ink will be capped at $30 million-$90 million and at $670 million during the course of the agreement period, with the rest carried by TW, according to a TW regulatory filing Thursday. CBS expects to capture more retransmission consent and other revenue in the coming years, which would help offset shortfalls during any given year.
Initially, CBS and Turner will split coverage of the regional semifinals, with CBS airing the regional finals and the Final Four games. Beginning in 2016, CBS and Turner will split coverage of the regional finals, with the Final Four and national championship games alternating between CBS and TBS each year.
"We have created a new strategic partnership that not only makes this prestigious property an ongoing core asset in our stable of major television events but a profitable one as well," McManus said. He added that the new agreement is "a significant financial turnaround" for the company compared with the final years of the previous agreements.
David Levy, president of sales, distribution and sports at Turner Broadcasting, called the agreement "a landmark deal" for his company.
"We are well-positioned to monetize our investment in NCAA programming across three nationally distributed networks," he said.
Levy added that Turner's past sports investments give him comfort that the company can make the NCAA work out well.
"We all know that marquee sports content is an expensive proposition," he said. "But it also drives audiences, ratings, ad sales and distribution revenue."
The deal marks TruTV's first foray into sports. Levy highlighted the channel's growing male- and young-skewing audience, which he said makes it "the next logical step to be a sports destination."
Turner will be the lead handler of the popular NCAA March Madness on Demand online service that provides live streaming video. The digital player used for the service will continue to be launched from NCAA.com and CBSSports.com, and Turner has retained rights for any TW digital property. Turner said it will develop and operate a player with enhanced digital rights.
In related news, the NCAA Division I Men's Basketball Committee has recommended an increase in the size of the tournament field from 65 to 68 teams beginning next year. Its board of governors will vote on the plan next week. During the Final Four a few weeks ago, the NCAA had outlined proposals to expand the tourney to 80 or 96 teams.
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