It's the most important event in the country for three weekends every year. And yet, it's hemorrhaging money to the point where CBS considered paying a rival to broadcast it. Are there implications for the free March Madness On Demand?
Wonder no more about the motivations for expanding the tourney to include more games: it's simply not profitable as is. Like, $200 million in losses every year. That's a lot to pay for the prestige.
Of course the problem is that the current deal was signed in 2003, when we were all riding around on solid gold Segways, and getting approved for mortgages with a down payment of a ham sandwich. A recession has a funny way of bottoming out advertising revenues, and no matter how good the tourney's ratings are, no one's going to pay for a 30-second spot what CBS predicted they would seven years ago.
So the plan, discussed by top brass at CBS and ESPN, was to give ESPN the tournament from 2010-2013. In exchange for taking on those guaranteed unprofitable years, CBS would mitigate ESPN's losses by giving them an unspecified amount of money.
Of course, that didn't happen, because someone at CBS realized that if they lost money negotiating a deal during a boom, drawing up a new one during a bust might pay off in the long run. And to hedge their bets, they partnered with TBS so the risk is spread out.
The first question that comes to mind is the future of March Madness On Demand. A reflex solution to problems with ad dollars is to stop giving the product away for free. But rest easy, says our source at CBS. There are no plans to mess with the service, as Internet ad dollars have been proportionally stronger than TV dollars over the past few years.
CBS Considered Paying ESPN to Take Tourney [NY Times]