CBS Taking a Bath on Baseball Deal : Television: Despite strong World Series ratings, the network is facing major losses from the first season of its $1-billion investment in the national pastime.

By JANE HALL

Oct. 24, 1990 12 AM PT

TIMES STAFF WRITER

NEW YORK — Baseball, it’s said, is a game that can break your heart. In the case of the World Series and CBS, it’s a game that can also break your bank.

Despite strong ratings for the four-game World Series sweep by the Cincinnati Reds against the Oakland Athletics, CBS is facing major financial losses from the first season of its $1.06 billion investment in major league baseball.

Although the exact amount is still to be determined, it is likely that CBS will lose in excess of $100 million on the first year of its four-year major league baseball contract.

Some industry sources estimate that the losses this year could go as high as $150 million. CBS executives call that figure exaggerated but acknowledge that they are likely to lose somewhere close to $100 million.

CBS hopes to recoup some of its investment in coming seasons. But the major league red ink it is writing now comes from a combination of what CBS paid for the four-year contract and the bad luck of having a World Series that went only four games, as did the American League playoff series.

When CBS captured the rights to major league baseball two years ago, the network was in the ratings cellar and was following a strategy that had worked for ABC a decade earlier: using popular sports events to promote the network’s prime-time entertainment fare. But to win baseball, CBS paid roughly $400 million more than what ABC and NBC were willing.

“I feel for them because they were betting a lot on the World Series,” said one advertising executive who asked not to be identified. “But after ABC and NBC had lost money in the last year of their baseball contract, CBS went out and paid more for the rights. In their ad sales projections, they figured that the playoffs and the World Series would go to six games out of a possible seven. They needed 18 games and got 14.”

The executive calculated that CBS lost $12 million to $15 million on each of the four games not played, for a total of $36 million to $45 million. (Unlike other areas of programming where networks may run “make-good” advertisements, ad dollars for Games 5, 6 and 7 of a World Series are specifically earmarked for that purpose; if the games aren’t played, the sponsors are free to take their money elsewhere.)

“Regrettably but predictably, it was a terrible deal that CBS made,” said Ken Schanzer, executive vice president of NBC Sports. “It’s always been a terrible deal that they made, and it was made worse by the sweep. One hopes that the ultimate result of this is that sanity returns to the process of bidding for sports rights.”

Despite the financial losses, CBS executives pointed to the ratings for the World Series as a positive for the network.

“Obviously, we’re disappointed because we thought the series was really building, but we couldn’t control the outcome of events,” said CBS Sports president Neil Pilson. “The financial losses were greater than anticipated. But we’ve established our credentials in baseball, and the ratings are better than what we normally would have gotten (with entertainment programming). It’s too early to close the book on baseball in year one.”

In last week’s ratings, released Tuesday by the A. C. Nielsen Co., CBS finished first among the networks, and the four World Series games ranked among the six most-watched programs. Overall, the World Series averaged a 20.8 rating and a 36 share.

These ratings were 27% higher than in 1989, but that was the lowest-rated prime-time World Series, when the Bay Area earthquake interrupted the event.

This year’s ratings were about 13% below the 1988 World Series, which went five games. When a series goes longer, however, the ratings tend to go higher in the later games. On a four-game to four-game comparison, CBS’ numbers were down 8% from 1987 and 11% from 1988.

“The ratings are on target with what we expected,” said David Poltrack, the CBS vice president in charge of research. “You have to remember that network ratings overall are down some 15% overall from 1987 and 1988.”