Transcript Principles & Practice of Sport Management

Chapter 17
Sport
Broadcasting
Introduction
• Electronic media has transformed the sport industry
and its relationship with the public.
– Today, sport fans can watch events unfold as they
happen around world.
• Broadcasting has also profoundly altered the business
of sports.
• Symbiotic relationship
– Sport entities rely on broadcasters for revenue and
publicity.
– Electronic media know that sporting events are a
sure-fire means of attracting audiences that
advertisers pay to reach.
The Electronic Media
• What is electronic media?
– Radio, television, and the Internet
• Sound and images are captured by electronic
devices and electronically encoded.
• Information is transmitted at the speed of light
(cables or broadcast transmitters/satellites) to
receivers.
• Information is decoded and transformed back to
sound and images.
• Electronic information can also be recorded for
use at a later time.
History
• 1800s: Electronic communications began with
telegraph (1844) and telephone (1876), which
relied on electricity and conductive wires.
• By World War I, “wireless” (radio) was well
established.
• 1921: First radio broadcasts of sporting events.
– KDKA in Pittsburgh broadcast first baseball
game—Phillies vs. Pirates.
– WJZ Newark, New Jersey, broadcast the
Dempsey–Carpentier fight and the Yankees vs.
Giants World Series later that year.
History (cont.)
• Network radio allowed many
local stations across the
country to broadcast the same
event.
• Broadcasters understood that
sports sold radios.
• 1930s: Colleges sold exclusive
rights to football games to a
sponsor, who then purchased
radio time from broadcasters to
air games.
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History (cont.)
• Radio increased fan support and was a valuable
publicity and promotional tool.
• After World War II: With television, consumers
could now both hear and see their heroes in action.
• 1960s: Growth in sport broadcasting was
dominated by two men.
– NFL commissioner Alvin “Pete” Rozelle
– ABC executive Roone Arledge
History: Rozelle
• Pete Rozelle
– NFL pools its regular season and playoff TV
rights and sells them to the highest bidder, with
revenue to be divided equally among the teams.
– Sport Broadcasting Act of 1961 was a result of
antitrust litigation over Rozelle’s plan.
• Granted professional football, baseball,
hockey, and basketball teams immunity from
antitrust actions regarding the pooled sale of
broadcast rights
History: Arledge
• Under Arledge, instead of simply showing the
game, ABC would combine sport and
entertainment.
• It would take the fans to the game by showing
them exhausted players on the bench,
cheerleaders, and mascots—bringing fans “up
close & personal.”
• 1970: Created Monday Night Football.
• Broadcast Olympics in primetime.
• Developed Wide World of Sports to show fans
“the thrill of victory and agony of defeat.”
History
• Huge ratings garnered by Monday Night Football
and the Olympic Games led broadcasters to pursue
the rights to additional sporting events.
• 1980s
– NCAA limited the number of times any one
university could appear on television and
distributed television revenue among its
members.
• Led to Board of Regents v. NCAA (U.S.
Supreme Court case), through which colleges
won freedom to sign their own deals for
college football.
The Business of Broadcasting
• Network: Responsible for getting event on the air
and generating sufficient advertising dollars to pay
the growing costs
• Rights holder: Responsible for putting the event
on the field
• Advertising on cable costs considerably less than
advertising on broadcast television
• Financial gap between cable and over-the-air
television is closed to varying degrees by the
additional revenue that cable networks realize
from subscriber fees
The Business of Broadcasting
• Network must obtain rights fees.
• If several networks are interested, a bidding war
can drive up the rights fee.
• Three typical rights arrangements
– Rights and production deal
– Rights only agreement
– Time buy
• Advertisers measure advertising efficiency by
calculating an advertisement’s cost per thousand
(CPM).
The Business of Broadcasting
• Audience research plays a vital role in
deciding what sports get on the air.
• Leading broadcast media research firm in
the U.S. is the A.C. Nielsen Company.
– Nielsen monitors television sets in ~5,000
homes across the country to represent a
statistical model of the nation.
– Monitors what channel the set is tuned to and
who is watching.
The Business of Broadcasting
(cont.)
• Program’s rating represents the percentage of
television households in the survey that are tuned
in to the program.
• Program’s share represents the percentage of the
television households watching television at the
time that are tuned in to the program.
• For advertisers in search of key demographics
(males, ethnic, higher education/income), sport
broadcasts are the ticket.
The Business of Broadcasting
• Economics of sport broadcasting industry are
based on advertising.
• Value of program is determined by the size and
composition of the audience it attracts.
• Formula used to calculate how much revenue must
be generated:
– Cost of rights + Cost of production + Allocable
overhead + The ideal profit for efforts
• If salespeople think the number is attainable, the
deal is made; if the sales people are not so
optimistic, there are alternatives.
The Business of Broadcasting
• Should always consider total return (benefits that do
not immediately appear on the balance sheet).
– Gaining a competitive edge over rival station or
network
– Generating goodwill and favorable public relations
– Building good relations with a team, league, or
conference to gain the inside track when additional,
more profitable events are up for bid
– For sports producers: Promotional opportunities to
stimulate additional ticket, licensed merchandise
sales, or favorable publicity to introduce a new
team or sport to a market
Career Opportunities
• Career opportunities in sport organizations should
multiply as teams become increasingly involved in
producing their own game broadcasts.
• Knowledge of broadcasting industry and how it
works is an important qualification for anyone
interested in a sales and marketing career.
• Students pursuing a career on the air should
explore radio and TV production and performance
courses as well as communications and journalism
courses.
Current Issues: Cable Television
• Cable operators realized that once they provided
unique programming, they could move into
densely populated suburban and urban areas.
• Today, more than 80% of viewers have cable.
• 1979: ESPN’s satellite signal was delivered to
cable systems across the country, providing sports
coverage beyond anything available over the air.
• ESPN expanded to include ESPN2, ESPNEWS,
ESPN Classic, and no less than 25 owned or coowned networks throughout the world.
Current Issues: Cable Television
(cont.)
• As TV dials have grown more diverse, TV
audiences have divided into ever-smaller chunks.
• ESPN and other specialty services pursue niche
programming, hoping to reach some of the people
all of the time.
• Financial success depends on creating
– An audience that is either large enough to
attract advertisers who will pay the bills or
– An audience eager enough to purchase
information and entertainment in numbers great
enough to cover cost of production
Where Do We Go from Here?
• New electronic environment presents both
opportunities and challenges.
– The financially beneficial and symbiotic
relationship between television and sports may
eventually kill the golden goose—prime-time
games alienate young fans because of the PM
timeslot.
– Women’s sports have benefited greatly from the
multichannel television environment.
– Combination of potentially valuable audience and
available broadcast time offers opportunity for
international sports of soccer, rugby, and cricket.
Where Do We Go from Here?
(cont.)
• Specific audiences are smaller than in the past;
however, advertising revenue is less and cash
rewards for playing on television have diminished.
• Revenue sharing between networks and
leagues/teams: Spreads the risk between the
broadcaster and the rights holder.
– Frees broadcasters from financial burdens and
forces teams/leagues to become active partners
and to market and promote their games.