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SBJ/20090518/This Week's News
NFL close to extensions with Fox, CBS
Published May 18, 2009
The NFL is negotiating to extend its television contracts with CBS and Fox by two years, sources said, taking the deals through the 2013 season. The developments emerged as the league late last week was said to be on the verge of settling its long-running dispute with Comcast over the cable distribution of NFL Network.
The two sets of negotiations are linked.
As an incentive to get cable operators to agree to carry its poorly distributed cable channel, the NFL has been dangling the idea of bundling in Sunday Ticket’s Red Zone Channel, which shows live-game look-ins during the league’s Sunday afternoon games. The league, however, needs to get permission from its Sunday afternoon broadcasters, CBS and Fox, before making such a channel widely available on cable. The league approached CBS and Fox in March about extending their deals through 2013, with the talks coming shortly after the NFL renewed DirecTV’s Sunday Ticket deal and disclosed plans to make the Red Zone Channel available to cable.
Several sources described the extensions as being close, with the networks most likely agreeing to a 3 percent to 5 percent increase over their current rights deals. That amount would be in line with previous negotiations. In 2004, when CBS and Fox signed the current deal, they agreed to roughly 4 percent annual increases. Fox agreed to pay the NFL an average of $712.5 million per year for the Sunday afternoon NFC package, and CBS agreed to pay an average of $622.5 million per year for the Sunday afternoon AFC package.
If the broadcasters agree to the two-year extensions, it would ensure that CBS broadcasts the 2013 Super Bowl and Fox would get the 2014 game. It’s not known if the negotiations have included talks about the extra one or two games that the league has discussed adding to the regular season.
The NFL Network deal would be much more surprising, given the public acrimony between the NFL and Comcast over the past year. Sources said the NFL dropped its 70-cent per subscriber license fee significantly in order to get digital-basic penetration, the same tier that houses MLB Network. Though a deal hasn’t been signed, sources said Comcast would not take equity in the network.
Sources credit Comcast CEO Brian Roberts and NFL Commissioner Roger Goodell for providing the impetus behind getting a deal so close. A digital-basic Comcast deal would account for more than 10 million homes, pushing total carriage for the network to more than 40 million homes.
But just as important for the NFL is that once Comcast, the nation’s largest cable operator, cuts a deal, that other cable operators generally will fall in line.
The status of both sets of negotiations is certain to be a topic of discussion at the NFL owners spring meeting this week.
Both the NFL and broadcast committee member Pat Bowlen, owner of the Denver Broncos, declined to comment.
The league’s broadcast partners are clearly keen to extend their deals given the ratings power of NFL programming, generally among the highest-rated programs on TV. Last season, Fox averaged a 10.5 rating and 17 million viewers for its regular-season games; CBS averaged a 10.0 rating and 16.2 million viewers.
In addition, a quick extension would keep the league from opening the process to other TV channels.
The extensions also make sense to the league for a number of reasons. Media and NFL sources said the league wants to match the contracts for CBS and Fox with the term of ESPN’s deal, which is scheduled to run through 2013. Sources expect Sunday night game broadcaster NBC eventually will sign a two-year extension to move to 2013, as well, though it’s not known whether a Super Bowl would be part of that extension.
Some sources also suggest that the league is looking to shore up its media deals before its labor issues come to a head.
The owners opted out of the current collective-bargaining agreement last May, shaving the last two years off the deal and making 2010 its last season. While 2011 is covered under the current media deals, the league would like revenue locked in for a significant period of time.
New NFL Players Association Executive Director DeMaurice Smith has expressed confidence a new deal can be cut, but NFL owner sources have not expressed similar enthusiasm. The owners contend that the players got too good of a deal in the 2006 CBA extension.
There are other reasons than just a lockout war chest to extend by two years. With the economy uncertain, neither side might want to commit to a longer-term extension, analysts said.
“If they could get an extension, even if they get a slight increase, the NFL would take that until they see which way the economy is headed,” said sports media consultant Mike Trager. “This also shores them up against a collective-bargaining action.”