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People scoffed four decades ago when ABC, CBS and NBC wrote checks totaling $46.25 million to televise NFL games in 1970, which included the first season of “Monday Night Football.”
Twenty-four years later, in 1994, people lampooned Fox, saying the new network was grossly overpaying for an NFL game package. That check was worth $395 million a year.
Fast forward to last week when news broke that ESPN had agreed to broad terms on an extension that would see it pay nearly $2 billion a year to keep “Monday Night Football,” and the lack of a response was surprising. There were no arched eyebrows and few sky-is-falling diatribes. Rather, there were knowing nods that the NFL is the country’s strongest sports entertainment property and poised to get stronger.
The deal, which has not been formalized, will include highlight rights, broadband rights and some form of mobile rights, sources say.
What’s notable about it, however, is what it doesn’t include. That nearly $2 billion doesn’t include any Super Bowls. It doesn’t include a wild card game initially (though it does put ESPN on the path to get one eventually). And, sources say, ESPN gives up cable exclusivity, allowing the NFL to create another live-game package to sell to another cable network.
Still, despite the rights fee, financial analysts who cover ESPN’s parent, Disney, weren’t concerned. While high, the price fits within ESPN’s cost structure. And the increase to an average of $1.8 billion through 2022-23 fits in with what ESPN already was paying, particularly if the added content from an 18-game season is factored in.
BTIG analyst Rich Greenfield suggested that ESPN will be paying close to $1.3 billion once its current deal ends in 2013. He speculates that a $1.8 billion average most likely would start around $1.5 billion, with escalators. With subscriber revenue of around $6 billion per year, ESPN still is sitting pretty.
“It doesn’t sound like a ridiculous number to me,” Greenfield said. “I never expected ESPN to lose ‘Monday Night Football.’”
The length of the deal, which goes into effect in 2014 and lasts for nine or 10 years, also makes the $2 billion number seem less outlandish.
“One of my concerns for ESPN has always been that they don’t own the content,” said David Bank, managing director of global media and Internet research for RBC Capital Markets. “But a deal like this gives ESPN a decade of visibility with the most important sports franchise on network television. That’s really important for them.”
With the NFL locked up for the next decade, ESPN can be more selective with other sports properties, Bank added. “It puts ESPN in a stronger position with everyone else.”
The deal, obviously, is a massive one for the NFL and its teams. Combining the average yearly payout from all of the league network deals, including the $1.8 billion that ESPN is negotiating, then splitting them among the league’s 32 teams, that equals about $150 million to $160 million per team annually. And that’s before teams sell a single ticket or any licensing, new media and sponsorship deals.
The deal clearly could have ramifications on the current labor talks.
“The NFL should be congratulated for another billion-dollar network contract. It does make one question how they can announce both a single TV deal worth $2 billion for ‘Monday Night Football’ and ‘negative cash flow’ in the same week,” said NFLPA Executive Director DeMaurice Smith. “Fans and players continue to be confused about their claims of a financial hardship as justification for a lockout.”
The NFL and ESPN started talking about extending the deal around Labor Day, when an exclusive negotiating window opened in ESPN’s current eight-year, $8.8 billion deal. The window originally expired around Thanksgiving, but talks progressed far enough that the two sides agreed on an extension. Talks reached the highest levels of both companies, with ESPN/ABC Sports President George Bodenheimer visiting NFL Commissioner
TIFFIN WARNOCK / STAFF
ESPN’s George Bodenheimer was involved in talks, along with the NFL’s Roger Goodell.
Even with a potential work stoppage next year, the NFL is in a clear position of strength during these negotiations. Its games are the most-watched shows on television.
All of the league’s TV partners posted viewership gains this year, with Fox, CBS, NBC, ESPN and NFL Network posting all-time viewer highs for their packages.
“Sunday Night Football” is this season’s top-rated broadcast show, and “Monday Night Football” is this season’s top-rated cable show. “MNF” games made up the 11 most-watched shows on all of cable in 2010.
“It is an astounding amount of money,” said sports media consultant Lee Berke. “But it’s in keeping with the fact that the league’s ratings continue to grow and that it’s the most valuable programming on television.”
The NFL carried a lot of other leverage into these negotiations beyond its wild popularity. Many of ESPN’s affiliate contracts would allow distributors to pay a lower rate to ESPN if it didn’t have NFL programming. ESPN
Prime-time football on Sunday and Monday has been a ratings champion this year.
The NFL also has a lineup of cable networks that would be willing to pony up the cash to get such a marquee NFL package, including Turner Sports, Comcast (Versus) and Fox (FX).
ESPN executives were particularly concerned that the NFL could wind up with an ownership stake in Versus if the league cut the channel in on a bundle of rights.
ESPN’s worries aren’t unfounded. Comcast already offered the NFL a stake in the channel once before in 2004,when it was bidding on the eight-game package that eventually landed on NFL Network.
And Comcast’s regional sports networks have followed a similar strategy, allowing the rights holders in various markets to obtain stakes in Comcast’s RSN. The Astros and Rockets own a combined 80 percent of CSN Houston, for example; the Giants hold a 30 percent stake in CSN Bay Area and the White Sox, Cubs, Bulls and Blackhawks hold 70 percent of CSN Chicago.
The NHL Network has beefed up its executive roster with the year-end goal of putting the network in 60 million American homes, launching new original content and broadening its presence in Europe.
Former ESPN producer Mark Preisler joins the NHL Network this week as an executive producer, and his addition comes less than a month after the NHL hired David Proper as the league’s executive vice president of media strategies and distribution. Proper was vice president of programming at Time Warner Cable.
In September, the league brought in former NFL Network executive Charles Coplin as executive vice president of content, who then in November hired Bob Chesterman as vice president of programming. Chesterman previously created an in-park television network for Six Flags theme parks and helped develop ESPN’s programming for the World Series of Poker.
“We are still in the growth mode, and we will continue to build ambitiously with staff as is dictated by the growth of the business,” said NHL Chief Operating Officer John Collins, who oversees the league’s media content. “But we have a good team in place, and now we have to prioritize what the primary mission of the network is.”
Collins said the team’s initial goal is to unify the network’s content and image with the league’s website, Center Ice package and GameCenter Live out-of-market streaming service. The team will then revamp the network’s 60-minute news and highlights show, “NHL on the Fly,” and develop new national pre- and postgame shows. Collins said the network also would take a serious look into producing behind-the-scenes programming in the same style as HBO’s recent “24/7” series that featured the Pittsburgh Penguins and Washington Capitals before this year’s Winter Classic.
Coplin, who worked alongside Collins at the NFL, said the team is in the “idea phase.”
“Right now our ideas far exceed our ability to execute. We need to develop the fundamentals to go forward.”
Executive Vice President of content
“At this point no ideas within reason are off the table,” he said. “Right now our ideas far exceed our ability to execute. We need to develop the fundamentals to go forward.”
The plans are ambitious for the NHL Network, which launched in Canada in 2001 and the United States in 2007 as a joint venture between the league and Versus. The channel’s programming revolves around “NHL on the Fly,” broadcasts of CBC’s “Hockey Night in Canada” and NHL and college games. The channel is not rated by Nielsen, something Collins says he hopes to change by year’s end.
John Shannon, former NHL executive vice president, said the primary challenge facing the network is the difference in culture and coverage between the Canadian and American markets. The NHL Network is produced in Toronto, but the majority of its viewership is in the United States.
“It was a challenge because Canadian viewers didn’t always want to watch what we had for Americans,” said Shannon, who is now a hockey analyst for Rogers Canada. “The network was never going to be above No. 5 in Canada because hockey comes out of the ground here, so the question is, How do you make an impact in the United States?”
Collins agreed that the saturation of hockey media in Canada means the network will focus on becoming the destination for hockey coverage in the United States. He also said the success of the NHL’s GameCenter Live broadband streaming service in Europe speaks to promising opportunities on the other side of the Atlantic.
Preisler and Chesterman will report to Coplin, who will in turn report to Collins. Proper, who spent 3 1/2 years with Time Warner Cable, also will report to the COO. Collins said Proper will be integral in unifying the league’s broadcast rights with existing and emerging technologies, overseeing affiliate sales and marketing, and negotiating rights for broadcast in Europe.
Proper, who worked alongside Collins as general counsel at the NFL, begins working for the NHL today. He said he would like to expand the network’s coverage to include games from European leagues.
“Some of the best players in the world come out of those leagues,” he said, “and we don’t see them until they have developed for four or five years.”
Preisler, who spent the last two years as a senior coordinating producer for ESPN’s “Baseball Tonight,” will oversee the revamp of “NHL on the Fly.” According to Coplin, Preisler also will develop news and opinion programming to boost the network’s coverage of the league’s tent-pole events, such as the Winter Classic, All-Star Game and Stanley Cup playoffs.
Preisler, a Buffalo native who played hockey through high school, said his goal is to create content that dives deeper into the game and its players.
“The more we can get inside the game of hockey,” he said, “[we can] use analysis to break down the game and tell people things they don’t know.”
Fox has secured the rights to the Pac-12 Conference’s football championship game this year, giving the network a doubleheader of championship games on Dec. 3. Fox also has the Big Ten’s title game that day.
Industry sources say Fox is paying the Pac-12 $25 million for the championship game and additional regular-season inventory that is the result of the conference’s expansion from 10 teams to 12 with Colorado and Utah.
The value of the championship game itself is $14.5 million, according to sources, with the rest of the value — $10.5 million — attributed to six additional regular-season Pac-12 football games next season on Fox Sports Net. Those games were part of a prior contractual obligation that Fox agreed to with the conference.
Fox’s deal with the Big Ten included a longer term of six years for $20 million to $25 million a year, plus $7 million a year for additional regular-season inventory that comes from the conference’s addition of Nebraska.
The Pac-10, which will officially become the Pac-12 on July 1, initially negotiated its championship game with ESPN, but the two sides could not reach a deal. When the game went to the open market, the conference came to terms with Fox.
“This is truly a game-changer because Fox is sending a serious message here that they see college sports as a critically important strategic initiative,” said Chris Bevilacqua, who is part of the media advisory team at Evolution Media Capital that works with the Pac-12. “With their recent acquisition of the Big Ten championship game and now the agreement they’ve struck with the Pac-12 for one year, Fox is showing they are serious about challenging ESPN’s dominance of college sports.”
Fox’s lineup on Dec. 3 puts the Pac-12 game in an afternoon time slot at 3:30 p.m. ET with the Big Ten’s game following in prime time. Fox’s shoulder programming is expected to include a college football pregame show as well as a bridge show between the two games.
Pac-10 Properties, which is managed by Fox, will hold the marketing rights to the game. The inventory for the inaugural game is not expected to include a title sponsor because the deal is for just one year.
The only drawback appears to be that USC, the league’s premier football brand, will not be eligible for the championship game. The Trojans are serving a two-year postseason ban as part of NCAA sanctions from the Reggie Bush scandal.
Fox’s acquisitions also put a dent in ESPN’s lineup on Dec. 3, which will feature just one title game, from the ACC. The Big 12, which lost Colorado and Nebraska, dropping it to 10 teams, no longer has a championship game.
CBS carries the SEC championship.
This spring, the Pac-10 will enter into negotiations for its next media deal. The current contracts with Fox and ABC/ESPN expire after the 2011-12 seasons.
Five years after stepping away from day-to-day involvement in the X Games, its creator, Ron Semiao, is back.
Semiao, a longtime ESPN executive who developed the X Games in 1995, has taken an active role as a programming consultant and content strategist on the X Games. It’s a role that will see him influence where X Games broadcasts are slotted on ESPN’s family of networks, what sports are featured during broadcasts and how long those sports are showcased.
“Ron is a phenomenal programmer, and he understands how to drive ratings,” said Chris Stiepock, X Games vice president of content and sponsorship development. “He is an extremely passionate and energetic guy, and he tends to lift people up around him.”
Semiao founded the X Games in 1995 and stayed involved in the event on a day-to-day basis until 2005. He’s spent the last four years as senior vice president of ESPN Films. In that role, he developed a number of scripted films such as “Ruffian” and one of ESPN’s first 3-D films, “X Games 3D: The Movie.”
“I’m very excited and enthusiastic about the future growth opportunities for the X Games franchise on a global basis,” Semiao said.
Semiao’s return to the X Games follows the move of the X Games franchise and organization back under the programming department. Scott Guglielmino, who now oversees the X Games as senior vice president of programming and Global X, thought Semiao’s daily involvement with the franchise would help reinvigorate the brand and business.
Summer X Games averaged a 0.72 rating and 1.17 million viewers during four broadcasts on ESPN and ESPN2 last summer, according to Nielsen. The audience was down more than 10 percent from the 2009 Summer X Games, which averaged a 0.87 rating and 1.3 million viewers across four broadcasts in similar time slots on the same network.
X Games executives Tim Reed, senior director of sports and competition, and Phil Orlins, coordinating producer, will continue to manage the competition schedule for future summer and winter X Games. Semiao will determine how many hours of programming will air and whether or not that programming will air on ABC, ESPN or ESPN2.
“His knowledge as a programmer is phenomenal,” Stiepock said. “It’s a great asset to have.”