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The NHL takes a better cable gamble

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#1 Rock


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Posted 23 August 2005 - 06:17 AM

Aug. 23, 2005. 01:00 AM

The NHL takes a better cable gamble
OLN to make NHL marquee property


In 1988, in the midst of the Edmonton Oilers' glory years, the NHL faced a vexing choice between money and exposure. That summer, the league's U.S. cable TV contract was up for renewal. The league's incumbent broadcaster, ESPN, wanted hockey back, but a brash upstart called SportsChannel America, was willing to pay a then-record $51 million (all figures U.S.) over three years to acquire the hockey rights.

SportsChannel's offer proved too good to pass up for former NHL commissioner John Ziegler and the NHL severed ties to ESPN, which was available in 46 million U.S. households, in favour of SportsChannel and its 5 million homes.

For SportsChannel, the deal was a disaster. While the cable channel three years later was available in 20 million homes, the broadcaster lost as much as $10 million on the agreement, and soon faded into obscurity.

More than a decade later, Ziegler's successor, Gary Bettman, has made a similar gamble with its TV rights. This one stands a far better chance of paying dividends. Instead of negotiating a new cut-rate contract with ESPN, the juggernaut that's now available in most of the 90 million U.S. homes that have cable TV, the NHL began a search to find a new broadcast partner on the heels of its new collective labour agreement.

The league wound up signing a contract for as many as three years with the Outdoor Life Network that could be worth at least $207.5 million. OLN, which also shows America's Cup sailing and the Tour de France, agreed to pay $65 million for rights this season, and $70 million in 2006-07. The cable broadcaster has a $72.5 million option for 2007-08 season and has also pledged to pay the NHL $15 million more if it signs a similar deal to pick up rights to another major sports property like baseball or football.

"This deal gives OLN credibility it can use to go after (baseball commissioner) Bud Selig and (NFL commissioner) Paul Tagliabue for games," said Jay Rosenstein, a former executive with CBS Sports. "I don't know if I'd call the deal a home run, but it's a solid double up the alley," he said.

For the NHL, the deal is a windfall on several fronts. Not only does the league stand to make more money from its new U.S. cable TV contract the NHL's over-the-air network TV rights are held by NBC but it is also poised to become OLN's marquee sports property.

The cable network, which has built its audience in recent years on the back of the Tour de France and cyclist Lance Armstrong's widespread popularity, needs another catalyst to spur viewership in the wake of Armstrong's retirement following this summer's race. The NHL hasn't been in the position of being a network's most coveted sports property since its ties to SportsChannel. When it was carried by ESPN, hockey was a bridesmaid most evenings. Used by the network to provide live event programming for its nascent ESPN2 channel, the sport wasn't mentioned on nightly ESPN newscasts until after news anchors had exhausted a host of stories about the NFL, NBA and even spring training baseball.

That's about to change.

"For us, this is going to be our crown jewel property," said Marc Fein, OLN's senior vice president of programming and production. OLN has already pledged to show one game a week in high definition and its owner, Comcast Corp., has promised $20 million worth of hockey promotions on its other broadcast properties.

For the broadcaster, which has 64 million subscribers, making money on the new NHL contract shouldn't be overly difficult. Like all cable channels, OLN depends on two main sources of revenue advertising income and money generated from cable operators, who pay a monthly subscriber fee to channels based on how many people have access to the channel. If OLN can increase that monthly subscriber fee by even 10 cents, that would mark an increase in its annual subscriber fees of $76.8 million, and that's assuming it doesn't gain any additional subscribers. That alone would help the channel pay its rights fee without selling a single ad or sponsorship.
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