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The four US television executives on the dais were silent when the moderator of their panel discussion asked what sports programming would most likely be profitable for their networks.
CBS sports president Sean McManus stared at Turner sports president Mark Lazarus, who glanced at Home Box Office sports president Ross Greenburg, who sipped water while Fox sports president Ed Goren sat mute at a sports business conference held in New York in March.
No one cited football, baseball, basketball, hockey or auto racing.
After agreeing to pay $US28.9billion ($44.5 billion) over eight years to air those events, US broadcasters say an advertising slump has made televising sports a money-losing venture, and they don't mind ceding the games to cable TV rather than paying more to keep them.
"The days of networks paying ever-escalating rights fees are over," said CBS president Les Moonves, who agreed to pay $US6 billion over 11 years to show the National Collegiate Athletic Association men's basketball championship beginning this season.
Viacom's CBS, General Electric's NBC, Walt Disney's ABC and News Corporation's Fox enjoyed rising advertising revenue through the 1990s.
They generated a record $US15.8billion in 2000, 60 per cent more than in 1990, according to the TV Bureau of Advertising, an industry association.
The National Football League, the National Basketball Association, Major League Baseball and Nascar shared in the prosperity, demanding and winning higher fees to broadcast their events. In 1998, for instance, NBC paid the NBA an average of $US350 million a year for the rights, more than double its annual fee in 1990.
The economics are less favourable now. Advertising revenue at the largest networks fell 10 per cent from 2000 to 2001 while regular-season ratings for the four major sports dropped about 18 per cent from 1997 to 2001.
Panelists said the cycle began with the athletes and ended in higher cable bills.
Cable networks like ESPN are raising rates to make up for higher rights fees, which result from skyrocketing player salaries. Basketball players, for instance, make an average of $US2.6million this season, a fourfold increase from 1990. Because owners are paying more, they want more from the TV networks, which pass along costs to cable operators, which raise the monthly cable bill.
During a Congressional hearing last week, cable operators blamed ESPN and other programmers for soaring costs. The operators said customers should be allowed to pick networks a la carte. Government mandates now force viewers to buy a complete package.
"I feel like somebody shot the current sports model," said Fred Dressler, the executive vice-president of Time Warner Cable, in an interview. "It's not dead yet, but it's on life support."
Fox was the biggest network spender on sports, signing a $US4.4 billion seven-year contract with the NFL in 1998, a $US2.5billion five-year contract with Major League Baseball in 2001 and a $US1.6 billion seven-year contract with Nascar in 2001. The company has said it didn't get its money's worth.
In February, Fox took a charge against earnings, reporting that it expected to lose $US909 million on the contracts because of a "severe downturn in sports-related advertising" and an "industry-wide reduction of projected long-term advertising growth rates".
Other broadcast and cable networks would follow suit, Morgan Stanley predicted in a report released on February 11. The securities firm estimated that the networks would lose about $US1 billion a year on sports contracts, with at least half the losses at over-the-air networks.
"Despite the nascent recovery of the advertising market, almost all of the major sports programming contracts remain in the red," said the report, written by Richard Bilotti, Kay Sheils and Scott Babka.
CBS, the second-biggest spender, agreed in 1998 to pay $US4 billion over seven years to join Fox in broadcasting the NFL.
Mr McManus, the CBS sports president, said the network would make a profit on sports contracts. On the dais, Mr McManus said his bosses had one rule for bidding on a sports contract.
"It has to turn a profit of at least $US1," he said.
NBC has stopped airing major professional sports. The network surrendered NFL rights in 1998, refusing to match a bid from Fox, and walked away from basketball last year, citing losses of $US150million annually. It got out of baseball in 2000. NBC would have lost $US400 million a year had it retained those contracts, NBC sports president Ken Schanzer said.
"We weren't prepared to stay in that business at the cost of entry," Schanzer said during an interview.
NBC still broadcasts the Wimbledon and French Open tennis tournaments, University of Notre Dame football, golf's US Open and Ryder Cup, horse racing's Triple Crown and so-called niche sports such as the Arena Football League, which doesn't require a rights fee.
The network has also agreed to pay $US1.51 billion for the rights to the 2006 and 2008 Olympics, which may be the only sporting event that can trigger a bidding war, TV executives say. The 2002 Winter Games in Salt Lake City drew 2.1billion viewers worldwide.
"The Olympics are special. It's a guaranteed audience," Fox's Mr Goren said. "If you have the hammer, you'll get the bucks."
Some cable networks like ESPN and AOL Time Warner's TNT, which don't depend solely on advertising for revenue, are willing to pay prices that the over-the-air networks aren't.
NBC's reluctance to spend on basketball didn't deter Disney from agreeing to pay $US2.4 billion over six years to show the NBA on ESPN and ABC, while TNT agreed to pay $US2.2 billion for its portion of the basketball contract.
"In every way that we can measure our new NBA deal right now, we know that it will be very successful over the six-year term of the contract," David Levy, president of Turner Sports, which includes TNT, said in a statement.
Disney said basketball would provide content for its array of outlets, including ABC, ESPN, ESPN2, ESPN.com and ESPN International.
Jay Rosenstein, a former CBS sports vice-president, said sports leagues were starting to recognise that broadcast networks couldn't afford to pay more. In February, the NFL had the right to renegotiate its eight-year $US17.6 billion TV contracts with CBS, Fox, ABC and ESPN in search of even higher rights fees. The league chose not to exercise the option because the networks were likely to demand payment reductions, he said.
"As the appetite of the leagues has grown, it's increasingly obvious that the major networks cannot sustain these rights fees," Mr Rosenstein said. "The NFL was very wise to wait
CBS sports president Sean McManus stared at Turner sports president Mark Lazarus, who glanced at Home Box Office sports president Ross Greenburg, who sipped water while Fox sports president Ed Goren sat mute at a sports business conference held in New York in March.
No one cited football, baseball, basketball, hockey or auto racing.
After agreeing to pay $US28.9billion ($44.5 billion) over eight years to air those events, US broadcasters say an advertising slump has made televising sports a money-losing venture, and they don't mind ceding the games to cable TV rather than paying more to keep them.
"The days of networks paying ever-escalating rights fees are over," said CBS president Les Moonves, who agreed to pay $US6 billion over 11 years to show the National Collegiate Athletic Association men's basketball championship beginning this season.
Viacom's CBS, General Electric's NBC, Walt Disney's ABC and News Corporation's Fox enjoyed rising advertising revenue through the 1990s.
They generated a record $US15.8billion in 2000, 60 per cent more than in 1990, according to the TV Bureau of Advertising, an industry association.
The National Football League, the National Basketball Association, Major League Baseball and Nascar shared in the prosperity, demanding and winning higher fees to broadcast their events. In 1998, for instance, NBC paid the NBA an average of $US350 million a year for the rights, more than double its annual fee in 1990.
The economics are less favourable now. Advertising revenue at the largest networks fell 10 per cent from 2000 to 2001 while regular-season ratings for the four major sports dropped about 18 per cent from 1997 to 2001.
Panelists said the cycle began with the athletes and ended in higher cable bills.
Cable networks like ESPN are raising rates to make up for higher rights fees, which result from skyrocketing player salaries. Basketball players, for instance, make an average of $US2.6million this season, a fourfold increase from 1990. Because owners are paying more, they want more from the TV networks, which pass along costs to cable operators, which raise the monthly cable bill.
During a Congressional hearing last week, cable operators blamed ESPN and other programmers for soaring costs. The operators said customers should be allowed to pick networks a la carte. Government mandates now force viewers to buy a complete package.
"I feel like somebody shot the current sports model," said Fred Dressler, the executive vice-president of Time Warner Cable, in an interview. "It's not dead yet, but it's on life support."
Fox was the biggest network spender on sports, signing a $US4.4 billion seven-year contract with the NFL in 1998, a $US2.5billion five-year contract with Major League Baseball in 2001 and a $US1.6 billion seven-year contract with Nascar in 2001. The company has said it didn't get its money's worth.
In February, Fox took a charge against earnings, reporting that it expected to lose $US909 million on the contracts because of a "severe downturn in sports-related advertising" and an "industry-wide reduction of projected long-term advertising growth rates".
Other broadcast and cable networks would follow suit, Morgan Stanley predicted in a report released on February 11. The securities firm estimated that the networks would lose about $US1 billion a year on sports contracts, with at least half the losses at over-the-air networks.
"Despite the nascent recovery of the advertising market, almost all of the major sports programming contracts remain in the red," said the report, written by Richard Bilotti, Kay Sheils and Scott Babka.
CBS, the second-biggest spender, agreed in 1998 to pay $US4 billion over seven years to join Fox in broadcasting the NFL.
Mr McManus, the CBS sports president, said the network would make a profit on sports contracts. On the dais, Mr McManus said his bosses had one rule for bidding on a sports contract.
"It has to turn a profit of at least $US1," he said.
NBC has stopped airing major professional sports. The network surrendered NFL rights in 1998, refusing to match a bid from Fox, and walked away from basketball last year, citing losses of $US150million annually. It got out of baseball in 2000. NBC would have lost $US400 million a year had it retained those contracts, NBC sports president Ken Schanzer said.
"We weren't prepared to stay in that business at the cost of entry," Schanzer said during an interview.
NBC still broadcasts the Wimbledon and French Open tennis tournaments, University of Notre Dame football, golf's US Open and Ryder Cup, horse racing's Triple Crown and so-called niche sports such as the Arena Football League, which doesn't require a rights fee.
The network has also agreed to pay $US1.51 billion for the rights to the 2006 and 2008 Olympics, which may be the only sporting event that can trigger a bidding war, TV executives say. The 2002 Winter Games in Salt Lake City drew 2.1billion viewers worldwide.
"The Olympics are special. It's a guaranteed audience," Fox's Mr Goren said. "If you have the hammer, you'll get the bucks."
Some cable networks like ESPN and AOL Time Warner's TNT, which don't depend solely on advertising for revenue, are willing to pay prices that the over-the-air networks aren't.
NBC's reluctance to spend on basketball didn't deter Disney from agreeing to pay $US2.4 billion over six years to show the NBA on ESPN and ABC, while TNT agreed to pay $US2.2 billion for its portion of the basketball contract.
"In every way that we can measure our new NBA deal right now, we know that it will be very successful over the six-year term of the contract," David Levy, president of Turner Sports, which includes TNT, said in a statement.
Disney said basketball would provide content for its array of outlets, including ABC, ESPN, ESPN2, ESPN.com and ESPN International.
Jay Rosenstein, a former CBS sports vice-president, said sports leagues were starting to recognise that broadcast networks couldn't afford to pay more. In February, the NFL had the right to renegotiate its eight-year $US17.6 billion TV contracts with CBS, Fox, ABC and ESPN in search of even higher rights fees. The league chose not to exercise the option because the networks were likely to demand payment reductions, he said.
"As the appetite of the leagues has grown, it's increasingly obvious that the major networks cannot sustain these rights fees," Mr Rosenstein said. "The NFL was very wise to wait
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