CBS and NBC are facing a game of chicken over National Football League broadcast rights after Fox Broadcasting Co.’s staggering acquisition of National Football Conference games for an estimated $ 1.58 billion over four years.
At stake is which Big Three network will lose TV’s highest-rated sport — and no doubt the goodwill of its affiliates — weighed against bottom-line concerns, with all three networks claim-ing to have lost more than $ 100 million each over their previous football pacts.
Fox Inc. chairman Rupert Murdoch, meanwhile, has again proven his willingness to pay essentially whatever it takes to get what he wants and figure out how to make financial sense of things later. The deal increases NFC broadcast rights by nearly 50% over the $ 265 million a year paid previously by incumbent CBS, which said it’s lost more than $ 150 million on the package.
Bids are in from both CBS and NBC for the latter’s American Football Conference rights, the less expensive and lower-rated of the two divisions. A decision is expected from the league this week, possibly as early as today.
“It’s in the NFL’s hands,” one source said of the AFC deal.
Separately, the NFL has finalized new deals with ABC regarding “Monday Night Football”– which also reclaims the Pro Bowl for the next four years — and cable networks ESPN and TNT night games, the terms of which weren’t disclosed.
All told, the previous agreements put more than $ 3.65 billion into the NFL’s coffers over four years. Fox’s price virtually assures that total will increase, following network estimates that fees would actually drop by 20%-25% on the latest round of negotiations.
CBS and NBC have taken a talk-tough posture regarding sports rights, but Fox made that stance difficult to maintain with its preemptive bid — which CBS officials said could lose more than $ 500 million over the course of the deal.
NBC prez-CEO Bob Wright and sports prexy Dick Ebersol are staying in the running for the AFC contract but refuse to overpay.
Fox was apparently determined to offer a preemptive bid and accept football as a loss leader, i.e. a franchise that loses the network money but recoups the dollars-and-cents impact in prestige, exposure and goodwill.
“It might be a loss leader — I say might — but it’s a great loss leader,” said Fox Broadcasting chairman Lucie Salhany, who noted that the connection would improve Fox’s national coverage, reinforce its brand identity, create promotional opportunities, boost its owned stations’ value and help its Sunday-night lineup –“all things that are going to make us money.”
Beyond the huge rights fee, counterparts maintain that Fox, by sheer virtue of its distribution system, figures to deliver lower ratings than CBS did, meaning the weblet will likely generate lower advertising rates, increasing its losses even further.
Salhany, however, said football would allow Fox to increase its coverage (they estimate 98% national reach for the games, up from 95% in primetime currently) and possibly even pick up some network affiliates.
Salhany acknowledged that Fox will talk to affiliates about the prospect of adjusting compensation to offset the investment in football. “They’re very, very happy,” she said.
In addition to the regular football schedule, Fox will air the high-rated NFC divisional playoff games, plus the Super Bowl — annually TV’s highest-rated event — in 1997. NBC will air the game for the second-consecutive year in January and ABC will have it in ’95, the 25th anniversary year of “Monday Night Football.”
For Fox, the football deal comes at a time when Murdoch may have felt compelled to make a bold move, with rival studio-backed networks in the works, the weblet’s latenight plans still a mystery after “The Chevy Chase Show” debacle and its primetime ratings declining with the expansion to seven nights.
Salhany said the larger issue was a commitment to the future of broadcasting, noting, “You don’t spend this kind of money because you have a show in latenight canceled.”
This also isn’t the first time Fox has sought to purchase credibility and clout for its stations with a checkbook, but certainly the most ambitious. The weblet has bid for football before, and its deals to air the Primetime Emmy Awards — both set at a preemptive price — were seen as key to helping establish Fox’s legitimacy from a perception standpoint, even if the long-term result may have been an overall diminution of the Emmy franchise.
Fox has no sports division but cited this as an advantage, pointing out that “in contrast to the other networks, the NFL will be Fox’s only sports commitment.” In a statement, Murdoch called the NFC franchise “the crown jewel of all sports programming” that “gives Fox and all its affiliates a totally new dimension.”
In addition to the rights, the weblet will also face significant start-up costs of creating a sports infrastructure, among them signing on-air talent — those under contract to CBS already having been sent into a tailspin as news of the Fox deal spread.
David Hill, who has been heading sports for Murdoch’s Euro satellite venture Sky TV, will hold up that area for Fox Broadcasting in a newly created position reporting to Salhany. The sports operation, unlike the other webs, will likely be situated in L.A.
Over the previous four years, the NFL received $ 1.06 billion from CBS, more than $ 760 million from NBC, $ 925 million for ABC’s “Monday Night Football”and $ 450 million each from cable networks TNT and ESPN, for a $ 3.65 billion total.
That’s largely because pro football is easily the highest-rated sport on television.
The NFC is the higher-rated of the two weekend divisional packages because it includes such markets as Chicago, San Francisco, Detroit, D.C., Dallas and Atlanta, while the AFC includes smaller markets like Denver, Cincinnati and Pittsburgh. Both conferences have teams in New York and Southern California, but the NFC has also dominated the Super Bowl over the last several years, increasing its prestige even further.
In fact, sources say Fox caught CBS by surprise, as Eye web officials assumed the weblet would go after NBC’s less costly AFC package if it did pursue football again. Fox officials said they were interested in either conference.
Fox apparently felt the need to help its new partner and justify the arrangement for those who may play Monday-morning quarterback, issuing a press release that included a fact sheet titled, “The NFL and Fox — The Perfect Partnership … Why it Works.”
After rebuilding its primetime status with an assist from Major League Baseball, a Super Bowl and the ’92 Winter Olympics (another is on the way in February), CBS has now lost baseball and possibly football.
Giving up the latter could harm CBS’ Sunday lineup as well, though recent history demonstrates that the benefits of such promotional platforms on primetime performance may not be as strong as believed, even with games played under the lights.
That’s one reason why the networks, after overpaying for several major sports , have become more willing to talk about yielding those rights, insisting deals must stand on their own from a bottom-line standpoint.
An exception is “Monday Night Football,” currently the only regular network primetime sports franchise. Because it starts at 9 p.m. EST and runs until midnight or later, “MNF” gives the network what amounts to an extra hour of primetime to sell — at the highest per-unit cost of any regular program — through the fourth quarter in addition to its promotional value. ABC and NBC will also split a dozen weekly primetime baseball games, plus the playoffs, beginning next summer.
The loss of football would leave CBS with only the NCAA college basketball tournament among major sports franchises.