ABC and ESPN paid $296 million less for NFL rights this season than they did last year, according to a securities filing by their parent the Walt Disney Co.
The sister networks will pay about $3.7 billion over the final three years of their NFL contract, starting with this season, with ESPN paying slightly more than half that total.
The reduction in rights fees stems from the NFL television contracts' structure, with the first five years being guaranteed and the final three at the league's option. The rights fees escalated over the first five years, but were reduced once the final three-year portion of the contract kicked in, according to Disney's annual 10-K securities filing.
It said that those final three years call for "relatively level" expenditures on the NFL.
For fiscal year 2004, which includes the 2003 football season, ESPN will spend $180 million less on NFL programming than it did the year before, the document said. ABC will spend $116 million less in cash payments to the league. When factoring costs related to the Super Bowl, which aired on ABC in 2003, the reduction is $300 million.
The media networks segment, which includes ESPN and ABC, continues to be Disney's best-performing business segment. It earned $1.212 billion during the fiscal year, representing 38 percent of Disney's total operating profit. Virtually all of that came from the cable side, as the ABC Network earned just $37 million (the mirror image of a $37 million loss the year before) while cable brought in $1.176 billion in profit, up 15 percent.
Disney does not break out earnings by cable networks, but ESPN and its affiliated services are widely thought to drive a large percentage of the cable segment's profits.
Revenue on the cable side was up 13 percent to $5.552 billion, with increased affiliate fees representing just over half that growth, or $455 million, and another $355 million coming from higher advertising revenue.
Expenses for cable were up 11 percent, or $981 million, with much of that attributed to ABC and ESPN's new rights deal with the NBA.
The SEC filing noted that "a significant number" of cable affiliate agreements will expire over the next 18 months, and that consolidation in the cable and satellite industries may adversely affect the ability to renew deals at equally favorable rates.
"If this were to occur," the document said, "revenues from Cable Networks could increase at slower rates than in the past or could be stable or decline."
