This Wall Street Journal ($) article describes the financial disaster that is the CBS contract with the NCAA for the right to telecast the NCAA Men’s Basketball Tournament. CBS is entering the second year of an 11-year, $6 billion deal with the NCAA for the rights to carry the tournament games. That high price, coupled with declining viewership for the games, almost ensures that CBS will lose tens if not hundreds of millions of dollars on the event over the life of the contract. Even optimists think the best CBS can hope for is to break even on the contract. The article goes on to point out:

The NCAA contract is particularly onerous for CBS, though. Not only is it more than double what the network had been paying, but also the rights fees will rise dramatically over the 11 years. This year, CBS will pay the NCAA $389 million for essentially three weeks of college basketball, not much less than what it pays the NFL for five months of regular-season and postseason football. For the 2013 tournament, the last under the current agreement, CBS will pay $764 million, according to the NCAA.

. . . Making the high costs even more worrisome is viewership. The audience for the NCAA tournament has been on a steady decline since hitting 34.3 million viewers for the final game in 1992 (Duke vs. Michigan) The 2002 final between Indiana and Maryland drew 23.7 million viewers, according to Nielsen Media Research. Last year’s audience for the Syracuse-Kansas championship game was 18.6 million. To be sure, the Iraq war hurt last year’s tournament numbers, but even so, viewership has clearly been on a downward trend.

And the clincher:

The NCAA also gets final say on who can and can’t advertise in the tournament . . . It also bans commercials for Viagra and other erectile-dysfunction drugs, bad news for CBS since pharmaceutical companies like to spend money on sports to reach older men.

Which leads to CBS’ mantra upon the inevitable renegotiation of this albatross: “No Viagra, no way!”

This Big Picture analysis reflects that the question is a close call.

In the wake of its earlier write down of oil and gas reserves and resulting management purge, Royal Dutch/Shell Group is the subject of NY Times and Wall Street Journal ($) articles today regarding the management failures that led to the overstatement of reserves. The WSJ article is the better of the two articles, and makes the following observation:

. . .the big forces that helped humble Shell are already clear. The oil giant has been plagued by what was once a source of strength: a quirky, loose corporate structure bestriding its twin bases in England and the Netherlands. And it erred in overrelying for growth on its traditional prowess for finding oil, as new discoveries have grown harder to eke out. The revision has also painted a starkly different picture of the company’s recent performance, showing Shell lagging behind competitors in key performance measures instead of just keeping up. The company has replaced reserves at a much lower rate than originally thought, and its costs are significantly higher.

And somewhat more ominously for Shell, the WSJ observes:

A number of mysteries remain unanswered. How did Shell misjudge its reserve so badly? Why didn’t anybody catch the mistakes before now? Why didn’t Sir Philip disclose them sooner? Did Shell actively try to hide the problem? The company’s current top executives — including Shell’s chief financial officer and the man who replaced Sir Philip as chairman — are under pressure to disclose what they knew about the reserve problems and when. Shell’s board signaled in a statement Tuesday that it is standing by them.
***
The SEC and Shell’s internal investigators are looking into whether the company’s bonus system provided financial incentives to employees to overstate reserves, according to people familiar with both probes. Shell has acknowledged shortfalls in its reserve oversight and auditing processes, and has restructured its auditing process.

Meanwhile, in this related article, the WSJ reports on the absurdly understaffed nature of the Securities and Exchange Commission‘s staff that reviews the oil and natural-gas reserves that publicly-owned oil companies claim in their regulatory filings. The entire job is left to just two staff petroleum engineers.

The bankruptcy lawyers are already lining up for this rather odd enterprise.

In light of this earlier disclosure, this announcement by El Paso Corporation yesterday is no surprise.

As this prior postreported, Chevron-Texaco is balking at closing its purchase of the former Enron building in downtown Houston because Harris County Commissioners have not approved a tax abatement in favor of Chevron-Texaco. This Houston Chronicle article reports that Chevron-Texaco has put off the closing until after the Commissioners consider the tax abatement.

Copy and paste the following URL into your media player
http://texasdwi.org/multimedia/zero_0100.mpg
and then get ready to see the most gut wrenching commercial that you will ever see regarding the horrors of drunk driving. This site contains more information about the young woman who is the subject of the commercial.

Texas cities’ Chambers of Commerce are not wild about this report.

Thomas O. Hicks, chairman and CEO of Dallas-based private equity firm Hicks, Muse, Tate & Furst, announced Monday that he would retire a year from now to focus on his personal investments. Hicks, Muse & Furst is still attempting to recover from big losses that it suffered from investments in telecommunications and Internet companies. Mr. Hicks is majority owner of the Dallas Stars NHL hockey club and the Texas Rangers MLB baseball club, both of which have their share of financial problems at this point.