The French Open began on Sunday and if you are an avid fan like me the first thing you noticed is that the Tennis Channel has taken a deeper cut of the exclusive cable television broadcast in the United States.  I don’t subscribe to the Tennis channel and until this year they have been only a slight nuisance, taking a few hours here and there and the doubles finals. But as I look over the TV schedule for the next two weeks I see signs of a sea change.

First of all, only the TC had the French Open on Memorial Day, yesterday.  This I think was true last year as well, but now this year all of the early session live coverage for the entire tournament is exclusive on TC.  ESPN2 takes over for the afternoon session and will broadcast early session games on tape.

This got me thinking about the economics of broadcasting rights.  I poked around and discovered in fact that the TC owns all US cable broadcasting rights for the French Open many years to come.  ESPN2 is subleasing those rights from TC for the segments they are airing.  So that is interesting.  Why is TC outbidding ESPN2 for the rights and then selling most of them back?

Two forces are at work here.  First, ESPN2 as a general sports broadcaster has more valuable alternative uses for the air time and so their opportunity cost of airing the French Open is higher.  But of course the other side is that ESPN2 can generate a larger audience just from spillovers and self-advertising than TC so their value for rights to the French Open is higher. One of these effects outweighs the other and so on net the French Open is more valuable to one of these two networks.  Naively we should think that whoever that is would outbid the other and air the tournament.  So what explains this hybrid arrangement?

My answer is that there is uncertainty about the TC’s ability to generate enough audience for a grand slam to make it more valuable for TC than for ESPN.  In face of this TC wants a deal which allows it to experiment on a small scale and find out what it can do but also leaves it the option of selling back the rights if the news is bad.  TC can manufacture such a deal by buying the exclusive rights.  ESPN2 knows its net value for the French Open and will bid that value for the original rights.  And if it loses the bidding it will always be willing to buy those rights at the same price on the secondary market from TC. TC will outbid ESPN2 because the value of the option is at least the resale price and in fact strictly higher if there is a chance that the news is good.

So, the fact that TC has steadily reduced the amount of time it is selling back to ESPN2 suggests that so far the news is looking good and there is a good chance that soon the TC will be the exclusive cable broadcaster for the French Open and maybe even other grand slams.

Bad news for me because in my area the TC is not broadcast in HD and so it is simply not worth the extra cost to subscribe. While we are on the subject, here is my French Open outlook

  1. Federer beat Nadal convincingly in Madrid last week.  I expect them in the final and this could bode well for Federer.
  2. If there is anybody who will spoil that outcome it will be Verdasco who I believe is in Nadal’s half of the draw.  The best match of the tournament will be Nadal-Verdasco if they meet.
  3. The Frenchmen are all fun but they don’t seem to have the staying power.  Andy Murray lost a lot psychologically when he was crowing going into this year’s Australian and lost early.
  4. I always root for Tipsarevich.  And against Roddick.
  5. All of the excitement on the women’s side from the past few years seems to have completely disappeared with the retirement of Henin, the injury to Sharapova and the meltdown of the Serbs.  I expect a Williams-Williams yawner.