Monday, February 28, 2011

C-USA, ESPN, CBS and FOX: Why its Important to Read a Contract

Sports Business Journal came out with an article today detailing how ESPN and CBS were unhappy with Conference USA's recent right deal with FOX Sports Media Group.  The article notes that ESPN feels that they were not provided with a right of 1st refusal on FOX's offer and CBS is upset that they were not provided the chance to pick up ESPN's portion of C-USA rights.  Let's examine relevant portions of this issue:

Right of First Refusal
From Wikipedia (who I hate using as a source, but oh well) -

Basically ESPN, in the existing contract that expires at the end of June of 2011 because college contracts tend to run on the athletic calendar cycle (July-June), is asserting that they had the ability to match any offer that C-USA was going to consider.  I don't believe FOX's offer is one they could have matched, particularly in the number of games and in the scheduling area, where ESPN previously aired many C-USA games on Tuesdays, Wednesdays and Fridays where FOX was going to keep Thursday night games as an option, but not schedule the other weeknights.  ESPN could have matched the money aspect of the conference without breaking a sweat.

What we don't know is the terms of the Right of First Refusal.  That right is negotiatiable and is not black/white in terms of what constitutes that right.  Does ESPN have to respond to C-USA within a period of time?  Do they have to match all terms or just the money?

CBS was upset because they didn't get a chance to get in on ESPN's portion of the rights because it appears that ESPN was still negotiating with C-USA up until two weeks before the FOX agreement was announced.  When CBS announced that it had negotiated a rights agreement with C-USA, the press release was vague and did not include any game guarantees.  My opinion is that wording was intentional with the hope that an ESPN agreement could fall through.  But since CBS will be compensated with extra live games for CBS Sports Network, their anger seems to have subsided.

Doesn't appear that they did anything wrong here.  Don't believe they induced C-USA to breach the contract with ESPN and negotiated in good faith.  They provided a better offer than ESPN, according to C-USA, both financially and coverage wise.

Here's a brief write up on the deal.

The lesson here is not to screw with ESPN's lawyers.  I'm not convinced that they want to have the C-USA rights back unless its on their terms, which in my opinion not at the level that FOX agreed to.  I see ESPN sending a message to other conferences that their rights and contracts must be lived up to.  If they sue, I'm not sure I'd want C-USA back if C-USA isn't a willing partner.  But I do want them and others to know that the contract must be lived up to.

ESPN's posture does give the impression that they are "Big Brother" or the "800 lb. gorilla", but they have a valid point.  Bottom line: ESPN knows their contractual rights and they'll assert that they be met.

They screwed up.  If ESPN and FOX were brought into meetings to discuss "game sharing" after the FOX deal was agreed upon, C-USA is essentially acknowleding that they didn't provide the proper legal notifications to ESPN in my mind. Otherwise they wouldn't bother with ESPN and continue working with FOX and CBS.  Whomever was in charge of the C-USA negotiations had to know that ESPN required the ability to match an offer.  If that right was ignored, they have a problem.  They, not FOX or any other entity, could have to compensate ESPN if this determined to be a breach of contract.


Gregory said...

Good summary. For clarification, the Fox / CUSA is a binding agreement and ESPN filing a lawsuit will not change that. ESPN's only remedy is monetary damages. ESPN may be using the threat of a lawsuit to leverage Fox into selling some games to ESPN. The problem is that Fox has no incentive to bargain other than wanting to make nice with their new business partner CUSA or if ESPN pays a lot of money (which ESPN can try to recoup from CUSA thereby ticking off Fox's business partner).

Matt Sarzyniak said...

I agree. This is not FOX's problem. This is C-USA's. FOX signed a deal in good faith and to take from their deal and give to ESPN would be a bad idea.