MediaMay 15, 2015

R&A opens talks year early on U.S. broadcast rights for British Open, deal expected soon

When Fox Sports reshaped the broadcast landscape by getting into golf with a stunning 12-year, $1.1 billion deal for USGA events - the jewel being the U.S. Open - it appeared there were not going to be any other golf properties up for grabs for a while, especially after NBC/Golf Channel locked up the Ryder Cup through 2030 months later.

The PGA Tour TV deal with CBS, NBC and Golf Channel runs through 2021. The PGA Championship is with CBS and TNT through 2019. The British Open is controlled by ESPN until 2017. And no one expects the Masters, which has had 60 one-year contracts with CBS and now has ESPN as its cable partner, to go anywhere.

But the Royal and Ancient Golf Club has opened talks for the U.S. broadcast rights to the British Open a year early and plans to have a deal before this year's tournament at St. Andrews.

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(Getty Images)

And multiple sources tell GolfDigest.com that the price tag on the Fox deal with the USGA - averaging $93 million a year - has something to do with the timing.

"They are going to lose their shirts," a source in the advertising community familiar with the ad rates said about Fox. The fear in the R&A, according to a second source, this one in broadcasting, is that heavy losses on the U.S. Open by Fox would hurt the market value of the British Open.

"Yes, I can confirm that they dropped their ad rates," the advertising source said, even though the Chambers Bay venue in Washington State means the broadcast will be pushed in East Coast prime time, which will boost ratings.

"It's safe to say they have dropped [the rate] well into double-digit percentages of what expectations were and maybe as high as 40 percent," said the advertising source.

Fox says this is not unusual.

"Anytime you add a new sport to the portfolio you go through a process of establishing a baseline and value in the marketplace," said a Fox Sports spokesperson about the fluctuating ad rate for the U.S. Open, adding that the current 75 percent sell rate is about where Fox expected to be at this time.

"We are currently negotiating multiple deals at varying levels of volume and CPM (cost per thousand) reflective of marketplace conditions," the Fox spokesperson said.

Advertising and broadcasting sources agree that ad rates are always a negotiation in which the network asks for its dream price and works from there.

But an indication of the difficulty of the sell for Fox was reflected in the fact that even some of the four USGA corporate partners - American Express, IBM, Lexus and Rolex - were slow to the party, according to multiple sources.

"It was a task to even get the corporate partners involved," one of the sources said. "But they finally got them all on board."

If ESPN does not get the British Open deal it will be in the odd situation of being a lame-duck broadcaster for two years - this year and next.

"I've been working on this since last July," said Alastair Johnston, vice chairman of International Management Group and the prime negotiator for the R&A. "We've been engaging fairly routinely with all four networks and the R&A came over to talk to them."

In addition to ESPN, in the mix are NBC/Golf Channel, CBS with Turner Sports as its cable partner and Fox which has Fox Sports 1 and Fox Sports 2 as cable outlets. Of those, only NBC/Golf Channel is without a major and clearly has a lot at stake.

"This all will be done before the Open Championship this year," said Johnston of IMG. He added: "Nothing will be announced the week of the U.S. Open."

That's likely a reference to the fact the Fox/USGA deal was unveiled on the eve of the 2013 PGA Championship, a timing that angered and puzzled many in the industry. Even if a deal is done before the U.S. Open - which is likely - it won't be announced until after.

TV insiders said ESPN is paying $25 million a year for the British Open and that the R&A "is looking for a sizable increase to help fund its global grow-the-game programs."

Multiple sources said the R&A wants an eight to 10-year deal. The fact the British Open is consistently the lowest rated of the majors on TV will impact the final price.

"It's not like the PGA or Masters or U.S. Open in that they thrive in the U.S. time zones," said a TV source. "This year, they will be able to push the U.S. Open into East Coast prime time. But the Open Championship starts at 3 a.m. Eastern."

Asked if Fox would lose money on the U.S. Open, Johnston said: "That sounds a little bit like stating the obvious, but no one will know until 12 years from now [if they overpaid for the USGA contract]. Fox has been aggressive and conscientious in putting together a golf team."

The source in the advertising community agreed with that assessment, saying Fox will make its money back through subscription sales of FS1 and FS2 and not through advertising.

"If they can grow FS1 and FS2, they can get that money back," said the source. "On the surface, Fox is going to lose a lot of money. But if FS1 is building an arsenal, they will easily get that money back on cable fees over time."

While Johnston says there is no clear favorite to get the R&A contract, a source not involved with IMG but familiar with R&A thinking says the incumbent has a leg up.

"They feel they have a very good partner in ESPN," the source said about the thinking inside R&A headquarters in St. Andrews. "They think [ESPN] blends innovation and story telling as well as anyone."

But the R&A is also in an era of change, becoming very involved in growing the game and recently opening membership up to women. It also ended its 60-year broadcast relationship with the BBC, signing a five-year deal with Sky Sports that begins in 2017 said to be worth about $16 million a year.

The source close to the R&A also said: "Promotion of the Open to new and existing audiences through traditional and digital media is also hugely important."

Who that will be deemed to be we will know before they tee it up at St. Andrews and, most likely, very soon after the U.S. Open.

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