Fox Sports Wants NBA Rate Relief

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The National Basketball Association's new six-year, $4.6-billion national TV deals are barely three weeks old, but the cable-centric pacts already have regional sports networks crying foul.

The new agreements with ESPN and Turner Network Television end the provision that requires cable systems to black out the national telecast in the home team's market. As a result, Fox Sports Net has started asking NBA teams to trim local rights fees because regional pro hoops telecasts have been devalued, Fox Sports Networks president Bob Thompson said.

Fox's new stance has already influenced the network's renegotiations with the Houston Rockets and Los Angeles Clippers, and could affect long-term deals with other clubs, said network executives.

The debate centers on Fox Sports Net's inability to provide exclusive coverage of a team's home games within its local market when that club appears on a simultaneous national telecast on ESPN or TNT. Those rights were revoked in the new NBA agreement, after national distributors complained that they were losing viewers to the regional sports telecasts.

Under the new deal, ESPN will televise up to 76 regular-season games this season, mostly on Wednesday and Friday nights. TNT will offer 52 regular-season games, mostly as part of its exclusive Thursday night doubleheader package — the only games on the NBA slate for that evening.

The league's NBA TV channel is also planning to offer up to 94 games when it tips in February. Combined, the three packages could place at least one national game on the screen every night of the week. As things stand presently, NBA TV telecasts would be blacked out.

With both regional and national networks simultaneously televising the same games, Fox believes it will inevitably suffer viewership losses, compromising ad sales.

"In the past we had what was considered an exclusive property in the shadow of the stadium, and now all of the sudden you don't have that," Thompson said. "Now if a game that we're airing appears on another carrier that doesn't provide us with exclusivity, we want a reduction on those rights fees for that game."

Thompson said Fox could be looking for as much as a 50 percent reduction in rates, based on the number of regional telecasts that air concurrently with a national ESPN or NBA TV telecast. It's too early to determine how much the loss of exclusivity will hurt ratings for regional telecasts, he admitted.

Reopening deals

While Fox's new rate mandate is on the table with current negotiations, Thompson didn't rule out the possibility of exerting new rate terms into extant long-term deals.

"At this point it's being built in as part of renegotiations," Thompson said. "But that's not to say that once we see what happens after the season in terms of ratings, we won't go back to existing deals as well."

Thompson said the network's new stance on rights has already played a part in two current rights-dispute battles — Fox Sports Southwest and Fox Sports West 2's respective attempts to ink new deals with the Houston Rockets and Los Angeles Clippers. "It's one of many factors," he said.

Fox Sports Net West general manager Steve Simpson was quoted in the Los Angeles Times
as saying the issue was a major sticking point in negotiations with the Clippers.

The two sides have since broken off talks, and the Clippers currently do not have a deal with a regional sports network.

"Of course, we would have liked to have gotten a deal done. But in light of the new NBA television deal and how it affects local rightsholders, local rights aren't worth what they once were," Simpson told the Times.

Teams aren't fazed

Two NBA team executives said last week they weren't too concerned about potential loss of regional network rights fees.

With two years left on its current deal with Sunshine Network, Miami Heat executive vice president and chief marketing officer Mike McCullough said it was too early to determine whether the blackout issue would have any adverse affects on future negotiations.

"Our ratings are pretty strong so far this season. And while you never know how things will play out, right now we have a terrific relationship with Sunshine," McCullough said.

Orlando Magic vice president of corporate sales Jack Swope confirmed that Sunshine Network brought up the blackout issue in its recently concluded three-year agreement, but he would not reveal specific points of the deal.

He said that local NBA games remain valuable to regional

networks and time will tell whether or not those rights are devalued because of the national package.

"It can affect negotiations, but you have to look at the value of the whole local package, including the total number of games offered," he said.

The league itself is skeptical of Fox's doomsday scenario with respect to the blackout elimination. League officials reported that through the first three weeks of the season, regional sports networks' NBA ratings were even with last year, while ratings for games on local broadcast TV were up.

NBA Television president Ed Desser said the blackout rule, when it was in place, only affected telecasts within a 35-mile area of the home team's arena, and that relaxing those rules has thus far added viewers to ESPN's telecasts rather than siphoning viewers away from the regionals.

"I can understand their argument, but I don't think the reality comports with it," Desser said.

Scheduling options

Thompson said teams had several alternatives to avoid a potential reduction in rights revenue. Teams could work around ESPN's schedule, so regional telecasts don't bump up against national games. Or teams could move games slated for broadcast up against the ESPN window.

"We would prefer not to schedule games against ESPN — we want our games exclusive. That's what we bargained for and that's what we try and to select," Thompson said. "If that's not possible, or if the quality of our schedule is diminished based on the games that ESPN is taking, we'll seek some relief."

Fox did complete a deal with the Portland Trail Blazers.

One week after shutting down its own regional sports network, the Trail Blazers inked their first-ever pact with Fox Sports Net Northwest. FSN will provide 30 games beginning Nov. 20.

Last year, the franchise launched its own regional sports network, but pulled the plug two weeks ago after failing to reach a carriage agreement with the market's dominant MSO, AT&T Broadband.

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