CBS, Turner Pay $8.8 Billion to Air March Madness Through 2032

  • Networks sign 8-year deal for NCAA men's basketball tournament
  • New deal lets networks adapt to changing media landscape

CBS Corp. and Time Warner Inc.’s Turner Broadcasting have agreed to pay $8.8 billion to extend their rights to air the men’s college basketball championship tournament through 2032, expanding their bet on sports even as questions emerge about whether it will remain as lucrative.

The games will continue to be shown on CBS and Turner’s cable channels -- TBS, TNT and truTV -- and CBS and Turner will alternate coverage of the Final Four each year, according to a joint statement from the companies and the NCAA Tuesday.

The TV industry is undergoing seismic changes, and broadcasting major sporting events is more important than ever. Sports are one of the few events that people still watch live, generating more advertising dollars and letting media companies charge higher rates for cable and satellite-TV providers to carry their channels.

Yet some question whether TV-sports rights have become too expensive and could eat into networks’ profits over time if more people cancel their pay-TV subscriptions. If so called cord-cutting accelerates, it could threaten the main sources of revenue that help pay for TV-sports rights: fees based on how many people subscribe to cable and satellite service, and advertising based on how many people watch their channels.

David Levy, president of Turner Broadcasting, said the agreement gives the networks flexibility to adapt to how people watch TV, letting Turner offer March Madness games directly to consumers.

“It allows us to think about digital and social and platforms we’re not even thinking about today,” Levy said on a conference call. “This is the kind of content you want to have in your portfolio. Having those rights gives us comfort that no matter how the ecosystem changes we’ll be able to monetize it across different platforms.”

CBS Sports Chairman Sean McManus added that “it was important for us that however people are consuming media in the future -- whether it be on a laptop or TV set or whatever ecosystem is -- all of those rights flow to both CBS and Turner.”

Levy said broadcasting March Madness has been profitable for Turner, and the new deal is structured so that “more of the financial upside is weighted to Turner.” Under the new agreement, Turner will continue to manage the March Madness Live website and and major events surrounding the tournament, including the NCAA March Madness Fan Fest and Music Festival.

Meanwhile, the deal “guarantees” that CBS will make a profit from the event “each and every year,” McManus said. As part of the deal, CBS’s potential losses are capped at an amount lower than what it makes on local station sales, ensuring the network turns a profit, according to a person familiar with the matter.

NCAA President Mark Emmert said the extension, which is more expensive than the previous deal, gives financial support to more than 1,100 NCAA member colleges and universities “who are utterly reliant on this revenue to make their programs work.” More than 90 percent of the revenue generated from the TV-rights extension will be used to benefit college athletes, according to a statement.

CBS, which has carried the tournament since 1982, joined with Turner in 2010 in a $10.8 billion, 14-year contract for the rights to broadcast the games. With the new agreement, the two companies will own the rights to air the tournament through 2032.

Television coverage across TBS, CBS, TNT and truTV has averaged more than 10.2 million total viewers over the last six years, according to the statement. However, Villanova’s last-second victory over North Carolina in this year’s title game on Turner’s channels drew 37 percent fewer viewers than last year. This year’s final game aired for the first time on a cable network. While the ratings were down sharply from a year ago, it was the second-biggest cable audience ever for a college basketball game, according to Turner.

Before it's here, it's on the Bloomberg Terminal.