League Officials Describe Recent Network Contacts

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NEW YORK (AdAge.com) -- NBC wants back into the big business of major-league sports and has made its interests known to at least two pro sports leagues, Advertising Age magazine has learned.

Escalating rights fees
The General Electric Corp. network all but dropped out of pro sports in recent years as it took a stand against escalating rights fees, arguing that it couldn't generate enough ad revenue to justify the investment.

But executives with two different leagues

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said they have been contacted by NBC and that the network will consider becoming a bidder again as rights come up for negotiation.

"We have touched base, we have had a very preliminary and cordial conversation," said a vice president with one of the leagues, who spoke on the condition of anonymity. "I would not characterize it as anything other than us being made aware of their thoughts.

A quiet approach
A TV sports consultant with close ties to NBC Sports confirmed the network's quiet approach. "They've basically been putting out the word, 'Hey, look, when your rights fees expire just give us a jingle before you do anything,' " the consultant said. "I would regard it as exploratory."

NBC Sports Chairman Dick Ebersol and President Ken Schanzer were on vacation and could not be reached. A spokesman for NBC Sports declined to comment, as did spokespersons for Major League Baseball, the National Basketball Association, National Football League and National Hockey League.

Baseball, basketball and football
NBC in the past has held TV rights to pro baseball, basketball and football, among other sports.

"We had a nice relationship with them in the past," said another league vice president. "You just don't throw that away. And, frankly, I can't imagine that they don't want to get back in the game at some point."

Nascar partnership
NBC has partial broadcast rights to Nascar, sharing the 39-race package with News Corp.'s Fox and AOL Time Warner's TNT in a combined six-year, $2.6 billion deal that expires in 2006. An executive close to the situation said NBC has talked about its desire to televise the entire Nascar season, including exclusive coverage of Nascar's premiere event, the Daytona 500, which it alternates with Fox. But the executive added that it's unlikely Fox would give up its portion of a deal that had provided a ratings boon to the networks.

The only rights fees currently up for grabs are for NHL. The league's five-year, $600 million contract with Walt Disney Co.'s ABC and ESPN expires at the end of the 2004 season, and negotiations for the next deal are expected to begin soon.

The NFL's eight-year, $17.6 billion deal with Fox, ESPN, ABC and Viacom's CBS expires at the end of the 2005 season. Baseball's $2.5 billion agreement with Fox and ESPN expires in 2006. The NBA just completed the first season of a six-year, $4.6 billion deal with ABC, ESPN and TNT after leaving NBC, which had aired pro basketball for the previous 12 seasons.

Other sports
In addition to Nascar, NBC Sports holds rights to tennis' Wimbledon and French Open championships; horse racing's Triple Crown; golf's Ryder Cup; University of Notre Dame football; and the Olympics through the 2012 Summer Games.

The network gave up the NFL in 1998, baseball in 2000 and the NBA in 2002, citing such numbers as a 38% drop in ratings in the last four years of its basketball contract and losses of almost $300 million.

The situation hasn't necessarily changed. In February, Fox took a charge against earnings and reported it would lose $909 million on its baseball, football and Nascar contracts. Overall, ratings for the four major sports dropped 20% in the last five years according to Nielsen Media Research.

Sports revenue down
Sports-advertising revenue at the four broadcast networks fell 49% in the first half to $871 million, from $1.67 billion in the first six months of last year, according to the Broadcast Cable Financial Management Association.

While some of that is attributable to the comparison to NBC's coverage of the Winter Olympics in February of 2002, sports-advertising revenue was still down $201 million in the second quarter compared with last year.

"That begs the question, what has changed?" said David Carter, president of Los Angeles consultant the Sports Business Group. "Does NBC see the economy turning around? It may be that ... NBC is saying 'Sports is just absolutely vital and it says a lot about us as a global brand.' "

"Or," Mr. Carter added, "do they think they can take a run at just one sports property and stem the losses?"

Olympics boon
NBC has proved it can manage a big-time property with its Olympic coverage. The network turned profits of $50 million on coverage of the 1996 Atlanta Games, $60 million on the 2000 Sydney Games and $75 million on the 2002 Salt Lake City Games.

Yet despite the losses from the major sports, networks continue to pay the rights fees, in part to parlay that into the ability to use major events (Super Bowl, World Series) as platforms to promote regular programming. Fox has been a master at self-promotion, often using the backdrop on its postseason baseball telecasts to superimpose promos for its shows.

Small-ball bust
Since giving up major sports, NBC has experimented with what experts call "small ball." The results have been disappointing. The XFL, an off-season competitor to the NFL, folded after one season in 2001. NBC aired the Arena Football League this year after cutting a deal in which it did not have to pay rights fees. But the AFL season ended in June with a 1.1 average national rating, well below the 1.5 rating NBC promised to advertisers.

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Richard Linnett contributed to this report.

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