Turner Sports will cash in on games, but not immediately

The sports television gods have gone mad.

Start with the Final Four featuring North Carolina vs. Duke and Kansas vs. Villanova on Saturday. The culmination of Mike Krzyzewski’s farewell tour as Duke’s coach. And a guaranteed blue-blood matchup in the championship game on Monday.

“It’s simply not possible for this to get screwed up,” said Patrick Crakes, former executive vice president for strategic insights and business operations at Fox Sports. “I mean, come on; you got four of the top 10 brands in college basketball. And you have the Coach K thing. So, like, it’s just bananas.”

It’s a bunch of bananas falling into the lucky laps at Turner Sports. But despite the potential blockbuster TV ratings, there’s something more certain than the outcome of those marquee games.

Turner Sports won’t cash in on them anytime soon. Even with ratings already up 12 percent compared to last year’s tournament. So what’s the deal?

“It’s a long-term play,’’ said Jay Rothstein, former vice president of sports programming for CBS Sports.

That play involves multi-year deals with cable distributors and annual deals with more than dozens of advertisers. It’s also part of a joint strategy, with Turner Sports and CBS Sports sharing the TV rights fees for the men’s NCAA Tournament, along with the expenses and revenue involved in televising it.

The networks are paying about $1 billion a year for those rights through 2032, and their accountants surely will figure out they left some advertising money on the table this year. And not the result of failing to anticipate at least partially what has transpired in the Final Four.

More than a week before 15th-seeded Saint Peter’s shocked second-seeded Kentucky March 17 in the first round of the tournament, CBS executive John Bogusz assessed the value of Cinderella schools like Saint Peter’s and blue bloods like Kentucky.

“We do tend to root for those blue bloods just because they have a history of delivering more audience for us,’’ said Bogusz, executive vice president for sports sales and marketing at CBS Network Sales. “We do like the Cinderella story, but as the tournament gets narrower in terms of the number of teams, if we had our druthers, we’d still like to have some of those bigger names up there.”

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Generally speaking, the blue bloods generate bigger ratings and, as a result, make that advertising time more valuable. And Bogusz disclosed something about the advertising inventory for the NCAA Tournament before the games tipped off.

“For all practical purposes, we are sold out,” he said.

So with the value of those 30-second and 60-second spots for commercials now worth significantly more than the original price, Turner Sports has little to sell. It’s also likely the networks charged less than the actual value of the advertising inventory.

Networks and advertisers negotiate deals based on ratings estimated by the network.

“You’re always going to want to over project,” said Seth Winter, who has nearly 40 years of advertising sales experience and recently retired as an executive at Fox Sports. “We would call it gapping the ratings. Frankly, the idea is to never leave money on the table.”

The risk of estimating ratings too high is that a network will fail to deliver on the projected ratings and be forced to find other advertising opportunities to make up for it – or leave an advertiser disappointed.

Turner Sports declined to provide the estimates it used, but it’s unlikely the network accounted for such marquee Final Four matchups before estimating the ratings it used to negotiate with advertisers. But Turner Sports is more focused on its ongoing deals with existing partners than on capitalizing on an unexpectedly attractive Final Four, a person with knowledge of the situation told USA TODAY Sports. The person spoke on condition of anonymity because they were not authorized to speak publicly about network strategy.

“The reality here is the business part of it is not immediately dynamic,” said Ed Desser, the former president of NBA Television. “It’s not like you win an Academy Award and the next day there’s lines at the box office.

“The tickets are sold way in advance, the sponsorships are sold way in advance, the commercials are sold way in advance. But it’s part of the overall benefit of being involved in sports because you get a Super Bowl that goes down to the last few seconds, you get a great Final Four matchup. That’s sort of the hallmark of sports is that you never quite know what will happen, and that’s part of the fun.”

And for advertisers, Desser said, “It’s always nice to overdeliver.”

Then come negotiations for next year’s advertising.

“If Final Four games rate well, it does put the Turner sales team in a good position going into next year from an inventory pricing and delivery perspective, for both the game itself, as well as the studio shows in and around it,” William Mao, vice president of media rights consulting for Octagon, told USA TODAY Sports by email.

This year, advertising from the men’s NCAA Tournament is expected to generate about $100 million, according to Bogusz.

“You’re in the range with that number,” he said.

But about 75 percent of the profit stems from cable subscription fees for Turner networks and distribution fees for CBS, according to Crakes, the former Fox Sports executive. He said a blockbuster Final Four is part of the larger property, the NCAA Tournament, that helps increase the networks’ value with distributors.

Rosenstein suggested Turner Sports and CBS Sports will find a way to collect extra cash from the Final Four bonanza. But Rosenstein, who spent 17 years at CBS Sports and later worked as an adjunct instructor at NYU in the Preston Robert Tisch Institute for Global Sports, said the networks will get creative.

“It’s possible that once this matchup is determined, that somebody’s knocking on a sales department door and says, ‘You know, we really want in on this. Do you have room for us? Can we express some inventory somewhere? Can you expand the postgame for us?

“There are things that you can do.”

But this goes beyond TV ratings, revenue and economic opportunities.

“Relative to a couple of years ago when there was no Final Four and everything got canceled and the world shut down, having a Final Four and having a good Final Four matchup-wise?” TV analyst Richard Greenfield asked. “It’s certainly a positive.”

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