Analyzing the CFL-TSN TV Deal

Earlier this week the Canadian Football League announced a new five-year exclusive broadcast and new media rights deal with TSNRDS starting in the 2008 season. The announcement was not a surprise, with the deal speculated on for months prior. Some factors of the deal have lead to questions about what affects a new deal will have on the broadcast landscape and the CFL. A full analysis of what the CFL gained and gave up provides the best tool to decide if this was a good deal.

CFL Gains

A first glance at the deal shows a substantial gain in rights fees for the CFL over the last five-year deal. However, that is not the only way to judge a contract. There are other reasons the league signed with TSN during the exclusive rights negotiation period.

  • The deal is believed to be worth $75-80 million over the five-year term, or $15-$16 million per year. This is reportedly an increase of $30-$35 million from the previous five-year contract, or a 67% increase.
  • A solid TV contract with a substantial increase from the previous makes the league and franchises more attractive to potential advertisers and investors.
  • The CFL gets a strong, sports-orientated partner for all their broadcasts and new media offerings (Internet, mobile and video-on-demand). This consistency will help improve their brand and image.
  • The CFL is guaranteed all of their games will be broadcast, which happened in 2006 for the first time since 1989. TSN plans on adopting another standard night for football, and scheduling will likely be much more flexible with TSN compared to the CBC.

CFL Concessions

Without question, the CFL did not pull the wool over the eyes of TSN. The league gave up additional rights and properties in this new deal.

  • The CFL negotiated only with TSN as the previous rights holder during the exclusive rights negotiation period. Without taking it to the open market, the league does not know what other players would have paid. Unconfirmed sources suggested a CBC-Global bid would have come in at $20 million a year.
  • By signing an exclusive deal with TSN, the Grey Cup will not be shown on CBC for the first time since 1952. This breaking of tradition is more a sentimental issue for CBC and tradition supporters.
  • The pay cable TSN network reaches approximately 8.8 million Canadian households, where the free over-the-air broadcaster CBC reaches approximately 13 million households. The CFL states they were more interested in the quality (sport fans) of households rather than the quantity.
  • An exclusive deal with TSN could result in no other bidders being at the table at the next negotiations, taking away any leverage the CFL has to get market value for their TV rights. While the CBC may decide not to bid if their sports department does not exist in five years, continued strong CFL numbers are likely to raise the interest of other players, like Sportsnet or Global, enough that TSN will not be able to make a take it or leave it offer.
  • Without wording in the contract to pay for rights on a number of games basis, or increase the yearly value with the addition of franchises, the annual yearly return to clubs will be reduced by expansion, causing franchise fees to be higher than the risk of starting a new franchise allows in order to soften the loss to other clubs, which will potentially inhibit expansion.
  • There will be a change in blackout policy, calling for the blackout of an unknown number games across the whole league. Individual clubs will not be responsible for deciding to blackout or lift the blackout on games, the decision will be at a league level, which may mean it will be tied to a formula like percentage of tickets sold so many hours before game time.
  • The league turned over new media rights after investing time with other partners to develop them the last few years. Locking up these rights in a five year deal eliminates any revenue growth potential from these burgeoning revenue streams.

Other Factors, Notes and Speculation

Other information about the agreement.

  • The CBC has first rights to the Grey Cup if TSN decides to broadcast the game on conventional broadcast TV. TSN insists they intend to broadcast the Grey Cup on TSN only.
  • The deal is for 77 CFL games (72 regular season, 4 playoff and the Grey Cup) per season with an eight team league. It is unknown if the rights fee increases with the addition of franchises, but it is speculated that it does not. If not, TSN will receive an additional nine games for the same fee if expansion takes place in Ottawa for the first year of the contract, 2008, as is the league’s goal. While it is not as likely a tenth team would be added before the end of the agreement, such an action would give TSN 95 games for the price of 77.
  • The CBC CFL broadcast crew has been decimated the last few years with the loss of primary play-by-play man Chris Cuthbert (laid off due to NHL lockout) and host Brian Williams, who both ended up at TSN. Without replacing quality with quality, the CBC left themselves exposed with only the tradition on their side. The CFL instead went with TSN, which will give them the best crews to broadcast the CFL playoffs and Grey Cup.

Analysis

There are some parts of the new deal that raise an eyebrow, however the CFL fully accepts it took some risks in signing the deal, but they believe these risks will pay off for them in the future.

The major risks undertaken by the CFL are:

  1. Moving to a cable-only broadcaster for all their games, including the showcases of the playoffs and Grey Cup, could backfire if viewer numbers drop and do not recover over the term of the agreement. Exposure of their game still trumps the contract value for the CFL. The CFL nor TSN expects this to happen.
  2. Not waiting to involve other bidders, the CFL signed a deal when there was no competing offers which may have better reflected the value of the property. This shows the league was very interested in the TSN partnership, not just the money value, and did not see a benefit to a continued splitting of rights with holders who showed no interest in the game.
  3. By eliminating CBC from football for five years, they may not be around to bid next time, effectively removing a bidder in a small Canadian market. The CFL again seems to be happy to sever their relationship with CBC due to the decline of the relationship that goes back a decade.

All of these risks, while they have potential to backfire, seem manageable. The CFL looks to step up their presence, image and brand with this deal, and for a niche player such as their league is, this type of deal makes sense.

Questions

There still are unanswered questions about this new television deal. The facts surrounding these details may never come out, but that does not stop me from wondering.

  • Is there any language in the contract to increase the value with the addition of franchises, and therefore the number of games available for broadcast? If not, why not? With expansion to Ottawa on the burner right now and Halifax a serious candidate if they win the rights for the 2014 Commonwealth Games (decided in 2007, with a stadium potentially ready by 2010) plus the value of bringing in these additional areas of the country into the league, the broadcasters stand with everything to gain.
  • Why was the CBC given first right of refusal to conventionally broadcast the Grey Cup if TSN decided to do so? If you want to make a new deal, why not sever all ties with the past? If TSN decided after the first year of the deal that due to declined viewership they wanted to move the game to conventional TV, CBC could snap it up and throw together a poor quality broadcast. It seems a TSN crew broadcast on CTV would make the most sense, but CBC potentially stands in the way of that.

Do you have an insight on the deal? Did I miss something? Leave a comment here.

References

‘End of an Era’: CBC Loses Rights To CFL – Dec. 21, 2006 Ottawa Citizen

TSN, RDS Go Solo In 2008 – Dec. 21, 2006 National Post

Grey Cup moves to TSN in new deal – Dec. 20, 2006 globesports.com

CBC is out, TSN is in – Dec. 21, 2006 Ottawa Sun

CBC out as CFL opts for TSN – Dec. 21, 2006 Toronto Star

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