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NBC may be the next player to take to the hardwood floors of Madison Square Garden.

Advertising Age has learned NBC retains an option to buy a significant minority stake in MSG, as part of ITT Corp.'s and Cablevision Systems Corp.'s $1.08 billion acquisition of the sports and entertainment property from Viacom.

An executive close to the deal said NBC, which has close ties and a number of joint-ventures with Cablevision, got to sign off on Cablevision's investment and could decide as soon as October whether to join the MSG partnership.

The executive said NBC's involvement could significantly enhance the value of MSG to its new owners, who would benefit from the experience of its NBC Sports unit.

ITT, for example, with an eclectic mix of businesses, including the Hartford Insurance group and the Sheraton hotel chain, has no experience in managing a sports or media property. And cable TV operator Cablevision's primary sports experience has been in programming partnerships with NBC.

The two companies are partners in Prime SportsChannel and NewSport and teamed in 1988 for the ill-fated Olympics TripleCast pay-per-view venture.

Another executive familiar with the MSG properties (which include Madison Square Garden, MSG Network, the New York Knicks and the New York Rangers) said MSG could significantly enhance NBC's portfolio, particularly its flagship TV station, WNBC, New York.

Currently, local Knicks and Rangers coverage is available to New Yorkers only via cable TV, including Cablevision's systems in the New York area.

However, it is likely that an NBC stake in MSG would lead to a combined broadcast and cable TV schedule that would put certain games on WNBC while others would be reserved for cable.

That local sports inventory would dramatically enhance the value of WNBC because it could generate significantly higher ratings and ad revenues than the cable TV coverage.

While cable systems such as Cablevisions' do get healthy ad rates for Knicks and Rangers coverage, these rates are a fraction of those for broadcast TV, and they justify the cost of the TV rights by the cable subscribers those teams attract to their systems.

But currently, only about half of the New York metro is wired for cable TV, meaning that many potential viewers cannot see the local sports games.

It would probably be in the best interest of those teams' new owners to increase coverage via broadcast TV.

To justify the loss in cable exclusivity, it's likely that Cablevision and WNBC could team for cable and broadcast ad packages.

However, the executive familiar with MSG properties said that it is unlikely MSG would provide much national marquee value for NBC.

Though numerous entertainment events are staged at Madison Square Garden, including big concerts and circuses, MSG does not actually own the TV rights to them.

MSG does own the Miss Universe Pageant and could develop other entertainment events that take place at the garden.

But the executive said other than the local media rights, MSG essentially is a "vanity play" for the new owners.

"It's a trophy and they paid an unbelievable price for it," he said.

Indeed, financial analysts originally put the value of MSG at about $600 million to $800 million, but a bidding war that included Tele-Communications Inc.'s Liberty Media unit, sent the price soaring beyond tangible values and yielded Viacom a better return than it originally expected.

Viacom acquired MSG via its takeover of Paramount Communications and sold MSG along with other non-strategic assets as a means to help pay down debt it assumed from that takeover.

But executives familiar with MSG said that it was poorly managed and the new owners could probably double its cash flow to about $60 million annually via better management.

Joe Mandese coordinates MediaWorks.

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