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NFL thrown for a loss by cable ops

League's net still can't get carriage deals

The National Football League so dominates the sports-media universe that it’s big news when the NFL gets roughed up in financial negotiations.

The sports world is still buzzing over the fact that the three-year-old NFL Network still can’t get carriage deals with Time Warner Cable, Charter and Cablevision, three of the major operators who continue to shun the network.

The NFL Network thought it would gain a vital advantage and pull those three operators to the bargaining table by convincing the league’s owners to carve out — for exclusive coverage — eight live regular-season NFL games in 2006-07 for the first time.

The league further ramped up the pressure by joining with DirecTV in a multimillion-dollar ad campaign targeted at cities where the nay-saying operators own cable systems.

The upshot: The NFL got thrown for a loss. Football season is over, and no deals are in the offing with TW, Charter or Cablevision.

The net runs plenty of NFL programming in the off-season — highlighted by the draft in April and training camp in summer — but it holds its biggest bargaining power in November and December.

“I’d call it a miscalculation by the league,” says Kevin O’Malley, TV-sports consultant and former top exec at Turner Sports, referring to the fact the NFL could have harvested $400 million a year or so for the eight games by putting them up for bid to such football-hungry cable networks as TNT and Versus.

O’Malley says he thinks that if the ops continue to hold out through 2007, “the NFL could put the eight games back into the marketplace and get substantial license fees for them.”

But Chris Bevilacqua, a partner in SPC Worldwide, a sports-marketing operation, says he’s convinced the NFL Network will keep the games through 2011, the expiration year of the contract, and beyond.

“Signing up 40 million subscribers in just three years is an incredible achievement for the NFL Network,” Bevilacqua says.

But the most widely circulated cable networks average 90 million; it’s the future growth of the NFL Network that its president, Steve Bornstein, wants to secure.

The cable-op holdouts are insisting they be allowed to pitchfork the NFL Network to the Siberia of a digital sports tier, where subscribers would have to pony up extra dollars every month. Since those tiers average less than 10% of a cable system’s subscriber base, the NFL Network is holding the line, fearful that its chances of reaching critical mass on these systems would be permanently hobbled.

The NFL Network can certainly afford to be patient. It’s on the way to chalking up a projected $400 million in license fees from cable operators in 2007, a giant leap over the $173 million it pocketed last year, according to Kagan Research.

The ballooning growth reflects the advent of the eight NFL primetime games, which began on Thanksgiving night; the NFL had the foresight to write a clause into the contract with cable ops that if the network secured live NFL games, subscriber fees on the average system would rocket from 34¢ a month to nearly 80¢.

And advertising revenues are expected to climb from $190 million in 2006 to $260 million this year.

The NFL Network also loves to tweak the cable-op holdouts by pointing out that its two biggest distributors, Comcast and DirecTV, each added far more new subscribers in the fourth quarter of 2006 than those forecast by the most optimistic analysts — 613,000 digital subs for Comcast and 275,000 for DirecTV.

“It may take two or three years,” says Bob Gutkowski, CEO of Sports Marketing Group Intl., “but as digital penetration keeps shooting up, the cable-operator deals for NFL Network will eventually get made.”

Or, as David Carter, a partner in the L.A.-based Sports Business Group, puts it: “Digital cable is growing so fast that what looks like Siberia today might morph into a bustling New York City over the next few years, turning the NFL Network into an asset worth billions of dollars.”

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