When upstart Fox snatched the National Football League broadcasting rights from CBS in 1993, the sports world was stunned. Fox was hardly tiny, but few expected it to displace CBS, which had carried pro football for 32 years.
That early aggressiveness set the tone for Fox Sports a unit of Australian media magnate Rupert Murdoch's News Corp. which muscled its way to dominance by later inking deals with Major League Baseball and NASCAR while blanketing major sports markets with local cable networks.
But as Fox Sports matures from brash upstart to established heavyweight, its priorities and leadership are changing.
David Hill is turning over day-to-day management to the division's president, Ed Goren, as he takes over Fox's newly formed DirecTV Entertainment Group. At the same time, Fox is taking a harder look at broadcast licensing fees that run into the billions of dollars without the guarantee of profits.
"As much as I enjoy our relationships (with leagues) and as sensational as those relationships have been for us, if it means overpaying going in, we'll have to walk away from any given contract," said Goren. "There are big decisions coming up that will affect what Fox Sports is in the next five to six years. We have to figure out how to (get broadcast rights) and still be fiscally responsible."
Big financial hits
When Fox Sports inked its first deal with the NFL for the 1994 season, News Corp. executives weren't expecting huge profits. They were just trying to build the Fox television brand from a cluster of mostly low-rated stations to a competitor on equal footing with ABC, CBS and NBC. The strategy worked, as the NFL deal persuaded some CBS affiliates to switch over and high ratings for football helped draw viewers to other Fox programs.
But the bottom line has taken several hits as a result of past spending habits.
In 2002, News Corp. took a $909 million charge against earnings for losses associated with its contracts with the NFL, NASCAR and Major League Baseball. Fox executives admitted at the time that they had paid too much, particularly in light of the soft advertising market in late 2001 and 2002. Fox's largest write-down $387 million was for its eight-year, $4.4-billion NFL contract.
The charges contributed to an $8 billion loss for News Corp. that year, though the parent company rebounded in 2003, recording nearly $1 billion in profit.
"It was really the price to get into the game. There really was a legitimacy factor to get the NFL as the centerpiece of their programming," said Paul Swangard, managing director of the University of Oregon's Warsaw Sports Marketing Center. "One can't evaluate the value of these rights fees without looking at what the value would be to create that network and get it up and running."
News Corp. recently conceded in a quarterly filing that it might have to surrender some broadcasting rights to competitors or face ever-escalating costs. The company also said its position could be undermined if teams or leagues opt to create their own broadcasting networks, which has happened in Denver.
Sports media consultant Lee H. Berke agreed that Fox, which already has scaled back its National Hockey League coverage, likely would take a hard line in negotiations with Major League Baseball when the current contract expires at the end of the 2006 baseball season. "They tend to be very aggressive in the marketplace, but they're going to have to choose their spots," said Berke.
Last year, the NFL renewed two network deals with Fox and CBS, guaranteeing $8 billion in broadcast rights through 2011. Fox and CBS officials declined to specify their share of the $8 billion. Still not renewed is the NFL contract with ABC, whose "Monday Night Football" long has been a network staple. Last week, The New York Times reported that ABC parent Walt Disney Co. was considering moving the Monday night game to its ESPN cable network and airing Sunday night games on ABC.
Fox Sports' broadcast presence began with the 1994 football season, when the network outbid CBS by agreeing to pay $1.58 billion for four years of the NFL. Two years later, Fox reached a four-year contract with Major League Baseball that was expanded in 2000 for exclusive broadcast television rights, including the All-Star Game, league championship series and the World Series.
Also key has been the establishment of 13 owned-and-operated Fox Sports Net regional cable networks and 22 affiliates.
Fox essentially replicated the national strategy at the local level: outbidding established broadcasters and building a lineup of professional and college sports headlined by high-profile teams. Like Fox Sports, the regional cable stations also raised production standards, bringing in more cameras and graphic enhancements such as the FoxBox, which has the score and time on the screen throughout the action.
The regional cable networks now reach 82.4 million homes, said Fox Sports Net President Bob Thompson, who oversees the semi-autonomous regional networks from an office at Fox's production lot in West Los Angeles.
Fox Sports Net has benefited from the establishment of the UPN and WB broadcast networks, whose programming has displaced sports on many local broadcast channels. It also brings the combination of advertising and subscription fees that allows it to outbid regional competitors for broadcasting rights for many teams.
By contrast, Disney's ESPN has focused on national networks as it expands its coverage of a variety of sports, from boxing to sport fishing.
"If you look across the country, the local broadcasters really aren't in the local sports business," Thompson said. "More and more of the games have shifted over to the local cable affiliates. Teams are looking to generate rights fees. We are in a better position to pay those fees than local broadcasters."
But Fox Sports Net faces increasingly stiff competition from Comcast Corp.'s Comcast SportsNet, which last November launched its fourth regional network in Sacramento. Comcast has sports networks in Philadelphia, Baltimore/Washington and Chicago.
A Comcast SportsNet spokesman, Chris Helein, said Comcast and Time Warner Cable plan a sports channel in New York next year that will feature Mets games.
In Chicago, Fox Sports Net's affiliate, which is a partnership with Cablevision Systems Corp.'s Rainbow Media Holdings, suffered a blow in September 2004 when Comcast joined the major sports franchises the White Sox, Bulls, Cubs and Blackhawks in creating a new sports network.
Fox Sports Net continues to operate in Chicago, but with a gutted schedule now headlined by the Arena Football League's Rush.
Last year, Comcast also reached a multi-year deal to make the National Football League's fledgling NFL Network available as part of its digital cable service. The network carries preseason games, NFL Europe League games, interview shows and softer feature coverage.
Fox Sports Net's chief operating officer, Randy Freer, said the Chicago experience was a reminder of the brutally competitive nature of sports broadcasting. At the same time, he said, Chicago was unique in that broadcasting rights for major-league teams expired simultaneously. In other markets, Fox has maneuvered for staggered expirations to prevent competitors from snatching up several teams at once.
"You really have to stay ahead of these things and you have to partner with the team and let them know you're the best partners to show the game," Freer said.
Some of that means higher production values, slicker graphics and more irreverent commentary that have become trademarks at both the broadcast Fox and its cable networks. Swangard said Fox's approach to covering sports has rippled across all the networks and local channels, to the point where some version of the FoxBox is nearly ubiquitous.
"Arguably even more than ESPN, it's really defined how people watch sports," Swangard said. "The FoxBox is really the Scotch tape of sports broadcasting."
Goren, who came to Fox Sports from CBS 11 years ago, said he, Hill and other leaders of the network constantly search for ways to make sports more entertaining and information-rich at the same time.
"David (Hill) was fond of saying that while we do sports, we're really in the entertainment business," Goren said. "As part of the entertainment business, we need to sugarcoat the information pill."
For reprint and licensing requests for this article, CLICK HERE.
Stories You May Also Be Interested In
- Hill Makes Climb to DirecTV Post
- NFL in Talks With ESPN, In Bid to End Cable Battle
- NFL Network Scores on League's TV Contract Power Play
- Fantasy Football Kicks Off Shows but Ratings Remain a Dream
- Sports Bringing a Fresh Profile To Infinity News Station KFWB
- Game Plan for L.A. Football Rights
- Baseball Team Deals Showing New Clout on Local TV Scene