ESPN to decline NHL option, could negotiate cheaper deal

Saturday, May 28, 2005

It appears that ESPN is set to announce that it will decline its option for NHL coverage next season. Both TSN and Sportsnet in Canada are reporting that the U.S. sports network has decided to pass on the option, with TSN reporting an announcement would come next week. But the decision does not necessarily mean the end of the NHL on ESPN.

There is speculation that ESPN's decision could be just the first move as it tries to negotiate a deal that would see it pay less than the $60 million in rights fees the option called for in 2005-06. 

ESPN's deal for the 2004-05 season, which was canceled because of the NHL lockout, would have seen the network carry 40 regular season games on ESPN2 and have exclusive rights to the conference finals and the first two games of the Stanley Cup Finals.

The network could still work out a similar deal for substantially less money.

The ESPN decision, which was due by June 1, has been the subject of much speculation. The network had hinted that it could decline the option on the NHL.

After ESPN signed a $1.1 billion rights deal with the NFL, the network said it would have to re-evaluate its relationship with other sports leagues and entities.

"ESPN, like everyone else, can’t afford to buy everything, and you’ve got to pick your horses and get behind them," Mark Shapiro, ESPN’s executive vice president of programming and production, told Street and Smith's Sports Business Journal. How that will impact MLB, NHL or NASCAR on ESPN is a story that remains to be told."

ESPN also did fairly well with the programming it used to replace NHL games cancelled due to the labor situation.

According to Street and Smith's Sports Business Journal, during the regular season, replacement programs averaged a 0.5 rating on ESPN2 compared with the 0.2 the  NHL pulled on ESPN2 and the 0.4 it got on ESPN last season.

Playoff ratings  from last year (0.7 on ESPN and 0.4 on ESPN2) are dead even with replacement programming from this season.

Even in the key demographic of 18 to 34-year-old males, the NHL numbers from last last year are only slightly better than the replacement programming. ESPN is getting a 0.6 in that demographic compared with 0.7 last year and ESPN2 is getting a 0.3 compared with 0.4 a year ago. 

Again, this may not end NHL games on ESPN. The league could still negotiate a deal with ESPN that would see the network pay it less in rights fees.

There has even been speculation that ESPN may be considering a revenue sharing proposal similar to the one the league has with NBC.

In that arrangement, NBC pays no rights fees up front but shares revenues with the league once it covers its costs of carrying the games.

Another option is that the league could find a new network partner.

But the national television landscape in the U.S. has changed dramatically for the league the past few seasons.

The 2003-04 season saw the NHL wrap up a five-year deal with ABC/ESPN that paid it $600 million ($120 million per year). Before that the league took in $155 million from Fox over a five-year span.

Now the league is looking a lot less money in national U.S. broadcast rights fees to go along with an expected drop in 2005-06 revenues due to the lost 2004-05 season. There's also been the threat from some sponsors that they may divert money from the league if the NHL labor dispute isn't resolved by the middle of June.

NHL U.S. Television Deals

Here's a look at the NHL's U.S. TV deals in recent years. The "Years" column indicates the year in which the NHL season begins.