Network and League to Split Advertising Revenue

By Published on .

DETROIT (AdAge.com) -- General Electric Co.'s NBC is back in the business of big-time sports, and on its own terms.

The network,

Related Story:
League Officials Describe Recent Network Contacts
which abandoned televising professional sports due to escalating rights fees, will sign a two-year deal to carry the National Hockey League beginning with the 2004-05 season in October, executives close to the deal said.

NBC and the NHL could not be reached for comment.

No upfront rights fees
According to the deal, no rights fees will be paid upfront. Instead, NBC and the NHL will split advertising revenue after production costs are paid. It is similar to the deal NBC cut with the Arena Football League two years ago.

NBC replaces Walt Disney Co.'s ABC as the league's national broadcast partner. Disney's ESPN is expected to continue as the NHL's cable TV outlet with a two-year deal estimated at $125 million.

NBC bowed out of big-time sports in recent years, giving up the National Football League in 1998, Major League Baseball in 2000 and the National Basketball Association 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 network is the official broadcaster of all Olympics Games until 2012.)

Taking a stand
The network took a stand against rising rights fees, arguing that it couldn't generate enough ad revenue to justify the investment. Currently, the NFL is entering the final year of an eight-year, $17.6 billion deal with News Corp.'s Fox, ESPN, ABC and Viacom's CBS. Baseball's $2.5 billion agreement with Fox and ESPN expires in 2006. The NBA is in the second year of a six-year, $4.6 billion deal with ABC, ESPN and TNT after leaving NBC.

But Advertising Age reported last year that NBC had quietly begun contacting the leagues, sayng it would consider becoming a bidder again under the right circumstances.

The two-year agreement with the NHL gives NBC a package of Saturday afternoon games, Saturday playoff games and the Stanley Cup finals. NBC last had the NHL from 1972-75.

A risk for NHL?
Though the NHL appears to be taking a risk by not receiving upfront rights fees -- its five-year contract with ABC and ESPN that expires next month was for $600 million -- the deal could end up being a key selling point for the league in its current labor negotiations with the Player's Association. The collective bargaining agreement expires when this season ends, and experts and observers have said the two sides are so far apart that the start of next year's season could be delayed.

Most Popular
In this article: