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Sunday night, the news broke that FOX Sports is bowing out of the remaining years of its billion-dollar deal to air the US Open; the final rounds will now air on NBC. FOX has been in cost-cutting mode the past few weeks — they canceled the studio shows WWE Backstage and Inside PBC. They also did not get the viewership they expected with the golf major, and had a brewing conflict with the tournament and their NFL rights.
An interesting wrinkle on the US Open deal came out from Joe Flint of the Wall Street Journal:
Fox signed a $1.1 billion pact that put the annual price at $93 million, much higher than the combined $37 million NBC and ESPN were annually paying. The price Fox paid for the USGA hasn’t paid off in big ratings. NBC’s new deal is only slightly more than the $37 million it and ESPN were paying six years ago, one of the people close to the talks said. Fox isn’t off the hook financially, though, as it is expected to cover the difference in its deal and the NBC deal with the USGA.
If you do the math here, it depends on the precise figure of which NBC is paying “slightly more” than $37 million for US Open rights, but NBC and FOX are going to wind up paying the USGA right around the same amount of money.
FOX, therefore, must have calculated that advertising revenue would not have totaled greater than their sunk cost of what they’re paying not to air the tournament, plus talent and production costs associated with televising the event.