RePACing Media Rights Deals

            While the Supreme Court’s controversial decision in the Citizens United verdict may have gutted campaign finance reform, it represents a boon for sports organizations. You may have many questions including what is the Citizens United case and how could campaign finance reform (or the lack of it) impact sports organizations. The Supreme Court’s decision in the Citizens United v. Federal Election Commission case allows companies to make unlimited campaign contributions to certain organizations (most frequently to Political Action Committees or PACs). As long as these organizations do not “coordinate” with a campaign then they are free to spend unlimited amounts of money on any “issue” they want.

            Many political campaigns have used the money they raise for media buys in specific markets. After the Citizens United verdict, it is anticipated that the 2012 presidential and congressional elections will set records for the amount of money spent on media purchases particularly with television advertising. For example, Republican super PACs raised more money than the four major candidates’ campaigns did in January of 2012. ESPN is already capitalizing on this trend. The Wall Street Journal is reporting that “The sports network has struck a deal with a middleman that will result in more political ads appearing on ESPN programs, including NFL and college football games, in October and November—the critical period before the general election.” The reason that political campaigns and PACs would be willing to spend with ESPN is that NFL and college football games reach large and specific audience demographics in targeted markets. Because many sports fans watch games live as opposed to on DVR, campaigns and PACs could be more confident that voters will watch their advertisements.

            ESPN’s decision to reach out to political campaigns, however, is not the most critical element of this Journal article. In fact, it is the combination that most campaigns / PACS are looking to spend money on sports broadcasts and that most political advertising occurs on local television channels that should be the really exciting factors for most sports organizations. Sports decision makers should recognize that there should be a dramatic influx of spending every time there are political campaigns. While much of the spending may come from national or statewide races (which occur generally every two and four years, respectively), local elections should have increased advertising purchases because of the Citizens United verdict. “Swing” states (Michigan, North Carolina, Iowa, Arizona, etc.) or states with open (i.e. no incumbent running for office) Senate and House of Representative seats (Maine, Nebraska, Virginia, etc.) will see a dramatic increase in local television advertising. For small colleges, universities and high schools located in these areas, this represents a reason to talk with Regional Sports Networks (RSNs) about broadcasting their games because their audiences include voters who could be critical in influencing the outcomes of elections.

            As has been mentioned in other blog posts, media rights agreements have become an increasingly important source of revenue for many sports organizations. Yet, many have argued that there is potentially a “bubble” in the space – i.e. RSNs will not be able to sustain the large contracts given to sports organizations. The new influx of political spending means that RSNs should expect a sustained increased in spending at least every two years particularly in the months closest to primary and general elections. For those entering new negotiations or looking to have their games broadcast for the first time, a discussion on the lucrative impact of campaign / PAC spending is something that needs to be part of any negotiation because this new advertising spend source can help justify increases in media rights agreements.