Sticking A “Dagger” In Broadcasters Sitting Close To The Action

            Should Steve Buchkhantz consider sticking a fork in using “Dagger!”? The Washington Wizards broadcaster goes to his signature call when a Wizards’ player sinks a shot that clinches a victory for D.C.’s NBA team. Buckhantz hit high up the decibel chart after Trevor Ariza’s last-second shot hit nothing bottom of the net during last night’s game against the Detroit Pistons. The problem is that the shot only hit the bottom of the net (i.e. the ball failed to pass through the rim before hitting the net). Instead of calling a dramatic Wizards win, Buckhantz had to retract his “Dagger!” call.

What is odd about the situation is most people appear to be empathizing with Buchantz rather than blaming him for the mistake. In fact, a large number of people would be more surprised if Buckhantz actually got the call right in the first place. The Washington Post’s Dan Steinberg states that the Detroit Pistons’ broadcaster as well as “thousands of fans in Verizon Center, and thousands more watching on television” believed Ariza made that shot. Deadspin, certainly not a sympathetic outlet to broadcasters making mistakes (just ask ESPN), said: “From [Buckhantz’s] seat (and from the first angle) it really did look like Trevor Ariza sealed an incredible Wizards’ comeback.”

If Buckhantz and the “Dagger!” seem safe then the real question here is why does Buckhantz have seemingly such a bad angle from his seat that he could not see what happened to Ariza’s shot. Don’t broadcasters usually sit courtside to avoid these types of situations?

Monumental Sports & Entertainment, which owns the Wizards, decided to move broadcasters from their traditional courtside seats to the Verizon Center seating bowl prior to the 2012-13 NBA season. That decision likely was made so that the team would have more premium tickets to sell. For years, broadcasters and reporters sitting courtside meant some of the most valuable seats in the arena were given away for free. However, the media rights deals that Monumental has signed clearly do not require that the broadcasters sit courtside for games. Therefore, it would seem to make financial sense to move the broadcasters to an area that is not in as much demand and less lucrative rather than have them occupy courtside seats.

Maximizing ticket revenue by eliminating free seats for reporters in the most expensive parts of the venue is an approach taken by many other sports organizations. The University of Kansas opened 40 new courtside seats, previously only available to the media, $15,000 per seat in 2009. The Cleveland Cavaliers created a new scorer’s table that was designed both to increase the number of courtside and the amount of television exposure for sponsor promotions in 2012. This follows the examples by the Washington Redskins, Utah Jazz, and Chicago White Sox, who all moved their press boxes further away from the action to sell premium tickets in the mid to late 2000s.

Monumental, however, took this process a step further. It did not solely move reporters who cover Wizards’ games farther away from the court. It also appears to be the only team that actually moved the home / away television and radio broadcasters farther away from the game action.

This move would seemingly not make much financial sense for Monumental. Regional sports networks (RSNs) such as Comcast SportsNet, are rapidly becoming sports teams’ largest source of revenue. As has been pointed out in many B6A blog posts, media rights deals with regional sports networks are the engine that is driving increased revenue growth and valuations for many sports teams. The $2.1 billion price tag for Los Angeles Dodgers acquisition derived from a new media rights deal with Fox Sports West estimated to now be worth $8 billion over 25 years. The Miami Heat also recently signed a new media rights deal with Fox Sports Florida that will pay the team $80-100 million on an annual basis.

Because Monumental is a privately-owned company, it does not have to disclose how much the Wizards make on courtside tickets. However, an analysis of publicly available information can provide a good estimate. Searching TicketMaster reveals that the highest price for a single courtside ticket for today’s game against the Knicks at the Verizon Center is $946.25. Most courtside tickets in the NBA are only sold as part of a season ticket package – meaning that they likely do not cost as much as the most expensive ticket. Even adding just eight courtside seats where television or radio crews sit at this most expensive price point, however, would generate an additional $310,000 per year for the Wizards. This is not a small amount of money but it is less than the league minimum for a veteran NBA player.  

At a time when media rights deal are driving so much value to sports teams, it seems like the Monumental is being a penny wise and a pound foolish. More specifically, Monumental is maximizing its ticket sales revenue at the expense of having a good a relationship with its broadcasting partners. For most sports organizations, maximizing ticket revenue to potentially damage a relationship with its RSN does not make sense. Why jeopardize a partnership that generates millions of dollars to make an extra few hundred thousand dollars?  

For Monumental, however, this decision actually does make financial sense. It is clear that Ted Leonsis (rightfully) thinks the Wizards’ current media rights deal with Comcast is undervalued: “They don’t pay us enough money. … It puts us at a competitive disadvantage. We don’t have the resources to be able to compete with some of these teams. So at some point, we have to either launch our own cable network (or get higher rights fees).” Earlier this season, Leonsis told several media outlets about the launch of the Monumental Network and how this channel is preparing to broadcast games in the future.

Instead of worrying about future negotiations with Comcast, Leonsis statements likely mean that Monumental is planning to broadcast Wizards games on the Monumental Network once its current media rights with Comcast’s agreement ends in four to five years. If Monumental does end its agreement with Comcast then it is actually making a smart move by moving the broadcasters away from valuable courtside real estate. While this may cause the occasional “Dagger!”-type mistake, it would be a bigger mistake for Monumental not to maximize all revenue streams at a time when the Wizards are struggling financially since it is not likely jeopardizing any future media rights money.

B6A also believes that what Monumental has done is the beginning of what will be a larger trend that will happen in the sports industry. The rapid increase in the value of media rights deals and the decreasing costs of broadcasting games makes it more likely that sports organizations will consider creating their own networks like the Monumental Network. This means it will become more common for television and radio broadcasters to lose their current seats close to the action. Since sports organizations are putting a “Dagger” in their RSN relationship, they can afford to sell broadcasters seats to season ticket holders.   

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.