By: Tom Malone
Professional sports leagues and major television networks depend on each other for increasing exposure and profit. The National Football League (NFL), Major League Baseball (MLB), National Basketball Association (NBA), and National Hockey League (NHL) dominate the professional sports market. These leagues deal with ABC, CBS, and NBC, as these networks are the major players in the national sports broadcasting oligopoly.
Professional sports leagues and more expensive cable networks like ESPN have made contractual agreements that some fear will take away from the potential for “free” sports viewing offered by the major three networks. Fans must pay an increased monthly fee for cable packages including ESPN and other sports channels in order to watch certain games.
The four major sports leagues created networks dedicated solely to the programming of league games, enhancing each league’s vertical integration. These channels require hefty cable package payments on top of basic cable fees. Pay-per-view channels increase a league’s potential for financial increase as well, forcing fans to amplify their payment.
Major “free” networks must pay more to compete with the cable networks that can charge fans for viewing potential, creating an interesting dynamic between leagues’ desire for profit and leagues’ necessity of a wide audience broadcast.
History of Network/League Contracts
In 1962, CBS paid $4.5 million per year to the NFL for broadcasting rights, opening the door for other networks to follow suit. NBC offered $42 million for a five-year deal with the American Football League before the two league merged through the NFL’s aspirations to increase horizontal integration. During the 1980s, the NFL received $2 billion from ABC, CBS, and NBC through contracted television broadcast rights. The three networks paid the MLB $1.1 billion through the decade after a six-year deal concluded. These “big money” deals gave major sports leagues complete control over each respective industry.
Legality behind Leagues
Several lawsuits and Supreme Court cases in the late 1980s to early 1990s defined the concept of a professional sports league in relation to corporate law, though the “hybrid” concept still features foggy details. Now, each team acts as a member of a league in accordance with the Sports Broadcasting Act. Each team sends a representative (usually an owner) to meetings where he or she acts as a member of the leagues’ “board of directors”.
The league itself acts as a single entity with monopolistic tendencies. The Supreme Court ruled in favor of the United States Football League after the league filed a suit against the NFL, claiming the dominant league monopolized the professional football business. Each league that attempts to compete directly with one of the four major professional sports leagues either flops or merges with the dominant monopoly.
The league divides profits (mostly) equally among its teams. Copyright licenses generate billions of dollars for each respective individual club in the league. Revenues from the sale of broadcast rights are shared between the two teams playing in a contest and with the league as a whole.
Individual teams have some rights to make contractual agreements with networks in order to broadcast games that would not be shown through the league’s network contracts. Some teams based the legality of the decision around the individual intellectual property rights of each team.
For example, “The Chicago Bulls wanted to broadcast all its home games not shown as part of the NBA’s national television package on ‘superstation’ WGN based in Chicago, but telecast throughout the U.S. on cable networks.” After the Bulls’ four championships during the 1990s, the NBA taxed each game that the Bulls aired on WGN in order to equalize other teams’ profits.
Professional sports leagues contract with other industries aside from television in order to diversify each league through synergy. EA Sports licensed the rights to use all NFL copyrighted material in the making of the company’s video games, taking away from ESPN’s sports video game profit potential.
To counteract this loss, ESPN made an agreement with EA that made the video game producer ESPN’s video game producer for 15 years as well.
The battle between professional sports leagues’ monopolistic attributes and the necessity of media corporations to broadcast games will continue to evolve, as new deals arise frequently. For now, fans lay at the mercy of ever-changing contracts between networks and leagues.