MLB’s New Turner Sports Deal a Promising Sign for Upcoming NFL, NHL and MLS Negotiations
The New York Post reported on Saturday (6.13) that Major League Baseball “consummated a new billion dollar deal with Turner Sports” that will keep a significant portion of the MLB postseason on Turner Broadcasting System (TBS). While MLB says "the deal is not done," a source with knowledge of the negotiations tells JohnWallStreet by Sportico that a short-form agreement has been signed. The extension - which does not include any additional playoff games (should the league decide to press forward with an expanded postseason format those games would be negotiated separately) and runs through 2028 - is said to be worth an average of +/- $500 million/year (MLB would not comment on the financial terms of the deal); an annual increase of +/- 52% (not the 40% that has been reported elsewhere). Media rights advisor/consultant Lee Berke (LHB Media) says the “growing value of MLB’s media rights, in a very tumultuous marketplace, is indicative of the strong demand for live sports programming;” promising news for the NFL, NHL and MLS which all have broadcast pacts expiring before the end of 2022.
Our Take: The timing of Andrew Marchand’s report was suboptimal from an ownership POV. While the deal won’t take effect until the start of 2022 season (i.e. the revenue increase isn't going to help offset any short-term losses), the optics of a new long-term ten-figure agreement would seemingly only make it more difficult to convince the players that they should take less money this year.
The timing of its leak might have been the only surprising detail of the new MLB-Turner Sports deal. It was well-known within industry circles that the two sides had been working on an extension for months (i.e. before the Coronavirus outbreak began) and it stood to reason the rights fee increase would exceed what Fox agreed to pay back in 2018 (Rupert Murdoch’s company inked a 7-year extension worth $728.6 million/year - a +39% increase - to retain its baseball package). That’s because MLB was determined to see that Turner Sports paid a premium for the rights after the network rebuffed the league’s advances to extend the pact 2 years ago (at a time when Rob Manfred & Co. were trying to acquire the old Fox RSNs and wanted all of their national rights deals to be in place).
The new deal makes sense from both sides of the table. MLB gets an increase in excess of 50% on a valuable postseason package and still manages to retain widespread distribution for its content (TBS is among the most widely carried cable networks along with ESPN, CNN and Discovery Channel), while Turner Sports ensures TBS' continued carriage within the cable bundle and positions the network to command future fee increases. Berke explained that “[cable networks] need to have tentpole properties to attract audiences and sponsors and to drive sub fees. The MLB postseason - along with March Madness and the NBA Playoffs - gives Turner a near year-round slate of major events [sought after by distributors and advertisers alike].” It has been rumored that Turner would like to add a 4th sport to round out its sports calendar.
Much of the value in the proposed deal is tied to postseason games. That certainly makes sense considering “they’re the most watched,” but it’s fair to wonder what that says about the value of national broadcast rights to regular season sporting events. Berke explained it’s really network dependent. While regular season contests may not draw massive ratings (the NFL is an obvious exception to the rule) and thus may be a ‘throw-in’ in Turner Sports' MLB deal (the network actually loses money on the regular season games and is forced to carry them), for a 24/7 sports network like ESPN having regular season games “allows them to maintain a solid conversation with their fans during the summer months and also [leverage] MLB’s substantial involvement with ESPN+." David Levy (senior advisor, Arctos Sports Partners and The Raine Group) added that "as sports betting becomes available in more states, regular season games should become that much more interesting [to fans and thus every network]."
MLB's newest billion dollar deal comes in the midst of the global economy's first depression in nearly a century and in spite of traditional pay TV subs continuing to decline (see: 'Worth a Look' below). Levy says that indicates just how valuable sports rights remain to the linear networks. The former Turner Sports president said that aside from “live sports being the only [programming] that’s maintaining growth in the TV space, sporting events also generate the highest CPMs and the highest ratings.”
The NFL, NHL and MLS all have broadcast packages coming up for renewal within the next two years and are seemingly well-positioned to capitalize. Berke says it's bound to be a “seller’s marketplace” for NFL rights. “The National Football League is likely to come close to doubling its rights fees because there’s a lot of outlets - both incumbents and new players (see: Amazon) - eager to bid.” As for the NHL, the long-time sports media executive believes an increase of “50%, 60% or more” could be obtained (though it now appears as if the league will wait until 2021 to ink that deal). MLS rights are a bit more difficult to peg as they’re bundled together with USMNT and USWNT games, but he does expect they too will grow in value.
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