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Monday, September 25
Updated: September 27, 8:31 PM ET
Fox pays for exclusive rights to playoffs

Associated Press

NEW YORK -- Get ready to call Fox "The Baseball Channel."

Fox wrested exclusive TV rights to Major League Baseball's postseason and All-Star game from 2001-2006 as part of a package worth about $2.5 billion.

How much is too much?

Anything that costs $2.5 billion is risky.

Beginning with the 2001 season, Fox will be the first exclusive postseason baseball rights-holder since CBS, which last held exclusive rights in 1993.

CBS lost millions of dollars, but remember that Fox can maximize this deal better because of their cable outlet (Fox Sports Net) and because the Division Series gives the network more games than CBS had.

"The strategy here is roughly to break even on the rights (fees) themselves, and then hope to profit from the ancillary programming and the spillover effect on other shows on the network," said Roger Noll, Stanford professor and co-author of "Sports, Jobs and Taxes."

Noll said it will be difficult to determine if Fox made a smart business decision. The contract runs out at the end of the 2006 season.

"Because the key here is the effects of the events on the profitability of other programs, putting this concept into practice to derive solid empirical results is very hard," he said. "You'll never find out what Fox (or any other network) truly believes was the profitability of any right."

Kenneth Shropshire, professor of legal studies at the University of Pennsylvania's Wharton School, believes the true value of the deal can be judged based on future deals.

"It really won't be clear until a couple of deals down the road," he said. "(Rupert) Murdoch's play for the NFL looked huge back when Fox got the initial deal; in time, it's made more sense. The fact that others dropped out of the bidding for the MLB deal does give reason to pause, but they may well have other priorities."

Andrew Zimbalist, professor of economics at Smith College and the other co-author of "Sports, Jobs and Taxes," said the success of the deal will be based on the state of baseball during the deal's six-year life as well as the ability of Fox to maximize the exposure.

"If there is more consistent competitive balance in baseball and there is good promotion by Fox, they could make out pretty well with this deal," predicted Zimbalist. "It's a lot of money we're talking about, but not inordinate amount of money."

While the deal could turn out well for Fox, Zimbalist said baseball might have hurt itself by going with an exclusive network for the playoffs.

"(This deal) is a little bit short-sighted for baseball. This time they took the larger bundle of money, but it's a more limited partnership from media ... The question is: Does it make sense for a sports league to take the larger revenue for the short term or is it better to include all to build the fan base of the league for the long term?"

The combined $570 million-a-year price tag for baseball playoffs still pales in comparison to CBS' $1.83 billion per year for the NCAA men's basketball tournament.

-- Darren Rovell,

The network will also retain its regular-season game of the week.

"We at Major League Baseball could not be happier with the result," baseball commissioner Bud Selig said. "They have been a good partner and an innovative producer of our games."

With the new Fox contract averaging about $417 million, and the remainder of ESPN's regular-season contract averaging $152 million, the two deals give baseball an average of about $570 million per season, or $19 million for each of the 30 teams.

The $570 million represents an increase of 50 percent from the $380 million baseball averaged the past five years from its contracts with ESPN and its five-year deals with Fox and NBC, which expire after the World Series.

Baseball originally hoped to capitalize on the recent trend of escalating sports rights fees by tripling its TV contracts.

NBC and ESPN, which like ABC is owned by Walt Disney Co., declined to match Fox's offer for their postseason packages by Tuesday's deadline. NBC, which will lose baseball for the second time in 12 years, broadcast the sport from 1947 through 1989, often as baseball's sole national network, then renewed the relationship in 1994.

ESPN, which has broadcast baseball since 1990, began an $800 million, six-year regular-season contract this season with about $40 million attributed to this year.

Gaining the relative ratings boost from the league championship series and World Series meant more to Fox than the other broadcast networks.

Fox had the biggest prime-time ratings decline of the four major networks during the 1999-2000 season. Its average prime-time audience of 8.97 million was down 17 percent from the year before, according to Nielsen Media Research.

"With the postseason year in, year out, it's going to be a huge advantage for the entertainment people," Fox Sports Television Group chairman David Hill said.

"The World Series is the No. 2 championship event in sports in terms of promotion. You couldn't want a better promotional platform for your entertainment programs."

The last time one broadcast network owned the full baseball package was 1990-93, when CBS lost hundreds of millions of dollars in a $1.057 billion deal, partly because of a steep decline in ratings and partly because of a national recession.

"That was in a galaxy a long, long while ago," Hill said.

Under the expiring arrangement, Fox and NBC split the league championships and alternated televising the All-Star game and World Series. Now Fox will have the TV rights to all of those events for six seasons, in addition to its regular-season rights.

That means Fox won't have to worry about another network underpricing it on selling commercials. "We will be able to maximize advertising rates," Hill said.

Of now having a single broadcast network partner, Selig said, "It's a great thing, stability. I really believe that having one partner over the next six years brings stability and a certain cross-promotion that I think will be very, very effective.

The more we talked about it the more we were convinced having one partner was in our best interest."

The extra load of first-round playoff games could be eased by shifting some to cable channel Fox Sports Net.

In June, Fox rejected baseball's demand that the network increase its yearly payments from $120 million to $360 million, while NBC declined to up its payments from $80 million to $240 million.

Those decisions allowed baseball to try to sell its rights on the open market. But CBS and ABC weren't interested in buying the rights at the prices baseball was offering.

The pattern of rising rights fees began in 1997 when the NBA agreed to four-year deals with NBC ($1.75 billion) and Turner Broadcasting ($890 million) for $2.64 billion -- more than double the league's previous deals.

In 1998, the NFL doubled its take by agreeing to contracts with CBS, Fox and Disney totaling $17.6 billion over eight years.

In November, Fox joined with NBC and TBS to win the bidding for NASCAR's TV rights. That deal is worth about $400 million a year, roughly four times what NASCAR made under its previous package.

Later that month, CBS held on to the NCAA basketball tournament by more than doubling its payments with an $11 billion, six-year contract that goes into effect in 2003.

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