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Down, Set … Price Hike: The NFL Leverages Deals With Major Media Partners Even as Ratings Decline

NFL Media Commercial Rates
Brady: Ben Liebenberg/AP Images; Wolfson: CBS; Michaels/Collinsworth: Zade Rosenthal/NBC

They’re on the 10-yard line.

Five media giants are close to finalizing new TV deals with the NFL that will solidify the rights holders and the platforms that will showcase professional gridiron action for the coming decade. The NFL bills will amount to steep, nearly 100% increases in some cases over the last major round of football pacts set in late 2011.

The price hikes, for deals expected to run at least 10 years, come at a challenging time for four of the five companies involved. The ones that aren’t named “Amazon” and buoyed by a market cap of more than $1 trillion face the prospect of paying significantly more for less at a time when they are also pressured to invest in streaming platforms and other innovations for the fast-changing, increasingly global content business.

Disney, Comcast and ViacomCBS have to dig deeper to cover the NFL bill (starting with the 2022 football season for Disney and in 2023 for the others) even as all three conglomerates are in the transition phase of forgoing highly profitable movie and TV content licensing deals in order to stock in-house streaming platforms with marquee content. It’s a perfect storm of the expense and revenue lines going in the wrong direction, at least for a little while. Fox Corp. is also bracing for higher pigskin prices starting in 2023, although the slimmed-down Murdoch empire has yet to place a large bet on a streaming strategy.

Not only have live football ratings indisputably been trending down in recent years, but the league is believed to be carving out more discrete streaming rights to games that were previously exclusive to its TV partners. The respected media research firm MoffettNathanson described the dynamics as “broadly negative” for Disney, Comcast and ViacomCBS. Amazon is expected to take on a bigger profile as an NFL partner by grabbing the “Thursday Night Football” package previously held by Fox.

Sports is seen as one of the last pillars of the traditional linear TV bundle that has been anchored for decades by ESPN, local sports channels and more recently Fox Sports. But media observers see the movement of more sports to niche streamers à la ESPN Plus and Peacock as accelerating cord-cutting and the continued reduction of linear MVPD subscribers. And unlike a decade ago, this time around it will be nearly impossible for the networks to leverage the higher cost of sports rights into higher retransmission consent fees from the largest cable and satellite distributors. Instead, the cable MVPDs have vowed to focus on the growing numbers of broadband subscribers as they lose video customers at a steady clip.

In this round of negotiations, the NFL is the only force with real leverage because even with ratings declines, the league’s games still consistently draw TV’s largest audiences. That matters to the networks that bank on having the largest reach. The hope is that making the game available in new formats and new places will bring along a younger generation of fans that at present seem to be tuning out linear TV at alarming levels.

Here’s a look at what the NFL renewals mean for each of the expected major partners.

DISNEY/ESPN/ABC

Disney is likely to see the lowest rate of deal-to-deal increase because the company has historically paid higher prices than broadcast rivals for the “Monday Night Football” package that has been on ESPN since 2006. Disney also shells out for the array of highlight reels needed to power coverage on ESPN and its many offshoots.

The new deal will bring ABC back onto the field for the first time in more than 15 years — a move that Disney needs in order to improve the broadcast network’s standing with MVPD partners. It’s expected that select “MNF” games will be simulcast on ABC, and that ABC will rejoin the Super Bowl rotation with CBS, Fox and NBC.

Disney is deep in investment mode as it boldly pivots to direct-to-consumer platforms. The runup in the company’s stock price even as the pandemic has walloped Disney’s parks division speaks volumes about Wall Street’s faith in the company to figure out the right path for a new era of TV. Plus, the ESPN infrastructure allows Disney to do more with its costly football content than most of its rivals.

COMCAST/NBCUNIVERSAL

NBCUniversal is looking at a 100% price jump to hang on to “Sunday Night Football” in the coming decade. It’s understood that carving out games and other content to be shared on Peacock and possibly USA Network is also a focus of NBCU’s talks with the league.

NBCU’s announcement that its NBC Sports Network cabler will shutter at year’s end is a sign of how the sports TV marketplace has taken a turn for the worse. NBCSN was hatched on the heels of Comcast’s January 2011 takeover of NBCUniversal, when the MVPD universe was still growing and Netflix was nowhere on the horizon.

NBCUniversal intends to fold in some of the higher-profile sports rights that had been on NBCSN, including NHL games, to USA Network as of next year. USA was once the No. 1 general entertainment cabler, but now NBCU’s cable flagship needs to be bolstered by sports content to maintain its distribution and subscriber fees.

FOXCORP.

The old Fox Broadcasting Co. was propelled significantly in the mid-1990s when Rupert Murdoch shocked the industry by stealthily elbowing CBS out of its Sunday package. But the new-model Fox isn’t in the market for loss leaders.

Fox executives were quick to telegraph in earnings calls and investor confer- ences that the network would not seek to renew its “Thursday Night Football” package beyond its 2022 expiration date. Earlier this month CEO Lachlan Murdoch acknowledged “the most likely scenario” would be giving up “TNF” and retaining its Sunday NFC conference rights, which keeps it in Super Bowl rotation.

VIACOMCBS

Of all the incumbent players, ViacomCBS is going to feel the pinch of NFL inflation on its balance sheet the most.

ViacomCBS is already in a delicate position, with Wall Street scrutinizing every penny of affiliate fee and advertising revenue for signs of earnings erosion among its suite of vintage cable networks. The Redstone empire is attempting to reinvent itself by expanding into subscription and free streaming platforms and by growing its linear and digital footprints overseas.

The company is doing all this under the strain of debt that piled up during the previous decade. For full-year 2020, the conglomerate had free cash flow of about $1.9 billion, according to MoffettNathanson research, and nearly $20 billion in long-term debt. Like Disney and Comcast, ViacomCBS is now in the position of giving up revenue from syndication and international sales to divert movies and TV shows like “A Quiet Place II” and “Younger” to the Paramount Plus streamer. In this environment, layering on an extra $1 billion for rights fees may require looking under some couch cushions — or belt-tightening in other areas.

AMAZON

The e-commerce giant has a deal with the NFL to air “Thursday Night Football” games through 2022, and is seen as the leading candidate to take on that franchise if Fox lets it go (Amazon streams the Fox feed of the game). If that comes to pass, it will be a nod to the looming power streaming media could have over sports. But there are still questions concerning how Amazon will produce a tele- cast without a major media company like Fox to assist.