New York -- Now that ESPN has signed a $600 million,
five-year deal with the National Hockey League, observers are wondering how the network
will make a profit from a sport that saw its television ratings suffer last year.
This has led some worried cable operators to fear more rate
increases.
ESPN and ESPN2 will offer up to 200 games per year, as well
as games one and two of the Stanley Cup finals, NHL and ESPN officials said.
ESPN will sell to ABC up to seven regular-season games, six
early round playoff games and up to five Stanley Cup finals games.
Steve Bornstein, president and CEO of ESPN, insisted that
the deal will be profitable. ESPN is paying more than double the cost of the current
package -- a combined Fox Sports and ESPN deal, which expires after the 1998-99 season.
ESPN earned a 0.7 Nielsen Media Research rating for 26
1997-98 regular-season NHL telecasts, down 13 percent from last year. ESPN2's ratings
were flat. ESPN2, however, suffered a 38 percent drop in playoff ratings, and ESPN's
playoff ratings dropped 29 percent versus last year.
But Bornstein argued that this year's ratings fallout
was an aberration -- the result of a two-week break in the season in February for the
Winter Olympic Games. He also blamed the lack of major-market teams in the playoffs for
the poor postseason ratings.
With the ability to cross-promote NHL games throughout
ESPN's numerous networks -- including ESPN Classic Sports and ESPN International --
as well as the development of new, U.S.-based NHL franchises in Nashville, Tenn.; Atlanta;
Columbus,
Ohio; and St. Paul, Minn., over the next two years,
Bornstein said there will be renewed interest in the sport, which will translate into
higher ratings and advertising revenue.
As far as promoting hockey over its sister ABC network,
ESPN's hockey coverage could get plugs during ABC Sports telecasts, but affiliates
would frown on the broadcast network being more aggressive than that.
"We put a prudent and smart deal on the table,"
Bornstein said. "The NHL, on average, delivers the highest concentration of young and
upscale viewers of any televised sport ... and this new agreement exemplifies the
different ways that ESPN can work with a league to maximize its exposure and our
revenue-generating potential."
But Madison Avenue didn't share ESPN's enthusiasm
for the league just yet. Jerry Solomon, president of national-broadcast sales for SFM
Media, said ESPN will have to prove the NHL's ratings viability before he would
consider paying higher adverting rates.
"I wouldn't consider it unless they prove that
they can increase ratings," Solomon said. "We'll pay on actuals, not on
futures."
And with sports ratings declining every year, Solomon
believes that it will be difficult at best to jump-start hockey's ratings.
"There are very few programs that get a higher rating
than the previous season, and sports ratings are going down every year," Solomon
said. "If the cross-promotion opportunities that ESPN now offers help ratings, they
will only save the ratings [that the NHL] gets now."
Bill Croasdale, president of the national-broadcast
division for Western International Media, also said ESPN would have difficulty raising ad
rates based on this year's performance, even suggesting a possible drop in rates.
"The NHL has been in decline, so, from the
buyer's side, we'll use last year's numbers and actually shave them
slightly to come in on the conservative side," he said. "ESPN's
cross-promotional effort [for the NHL] is a good move, but until it provides a bounce in
the ratings, we can't count on it to be the end-all solution."
Cable operators are worried that ESPN could mask its league
fees within its new 1999 rate, which the network will negotiate next year. While ESPN
executives have vehemently denied that the network will tack on an NHL surcharge, they
admitted that it has yet to set an overall network rate for the upcoming year.
Earlier this year, ESPN imposed a 20 percent increase on
operators, on the heels of its $600 million, eight-year National Football League deal --
although it has offered operators incentives that would effectively reduce the rate.
"One way or the other, we'll end up somehow
subsidizing the NHL," one top 10 operator said.
As part of the NHL deal, ESPN Classic Sports will feature
vintage NHL games, while ESPN and ESPN2 will telecast nongame, NHL-related programming,
including the NHL draft. The network also has exclusive rights to use NHL footage at its
ESPN Zone and ESPN Club theme restaurants.
And ABC could gain an extra year of NHL coverage: Sources
familiar with the situation said the league may look to buy out Fox Sports' remaining
year under its NHL broadcasting contract, although NHL commissioner Gary Bettman said the
league is still under contract with Fox. "Everything else is still speculation,"
Bettman added.
