SBJ/Jan. 24-30, 2011/Media

Is Verizon deal slowing NFL Network growth?

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Despite more interest around the NFL than ever and record TV ratings for its games, NFL Network’s distribution continues to stagnate at nearly 57 million homes. The network appears no closer to cutting deals with three of the country’s five biggest cable operators than it has been for the past two years, according to cable and league sources.

Despite striking a deal with Comcast nearly two years ago — a deal league officials thought would force other operators to follow suit — NFL Network still can’t find carriage on Time Warner Cable, Cablevision and Charter.

One of the reasons for those holdups is the exclusive four-year, $720 million deal the league signed with Verizon last spring.

Sources say the Verizon deal has become a significant stumbling block during carriage negotiations and is one of the reasons why cable operators still are dragging their feet on carrying NFL Network.

League executives have not had serious discussions with any of the cable operators since the fall, sources said.

The NFL refused comment for this story, citing the ongoing negotiations. Neither Time Warner Cable nor Cablevision would comment either.

Cable operator sources say the biggest obstacle remains price. In the spring of 2009, Comcast agreed to a nine-year deal that would average more than 50 cents a subscriber a month, according to sources. Though still well behind other sports networks like ESPN, which is more than $4, NFL Network’s rate makes it one of the most expensive channels on cable systems. In the fall of 2009, Comcast also launched NFL RedZone on its sports tier, which has much smaller distribution, at a cost of about 25 cents a month.

But the Verizon deal has become a significant hurdle for the remaining holdouts. Verizon has the exclusive mobile rights to stream NFL Network’s live games, plus the NFL RedZone channel on Sunday afternoons, and that is a nonstarter for many operators.

“Time Warner is not going to do deals that don’t contemplate multiplatform rights,” said one cable industry executive with knowledge of the talks. “Time Warner has made it clear that it wants to buy content all the way through the food chain.”

As an example, the executive pointed to Time Warner Cable’s ESPN deal, which allows the multisystem operator to stream ESPN, ESPN2 and ESPNU to its broadband and mobile customers.

Cable operators have been outspoken about paying for TV rights, broadband rights and mobile rights in one bundle, as part of the industry’s “TV Everywhere” initiative.

“TV Everywhere is the cable industry’s big push,” said Rich Greenfield, a financial analyst at BTIG. “Cable operators want as many rights on as many platforms as possible.”

Given the huge popularity of NFL games on TV, Greenfield is surprised that cable operators like Time Warner and Cablevision still are holding out on NFL Network, even if they can’t secure multiplatform rights.

“When you look at the importance of the NFL on TV, it seems more valuable than anything else you can put on your system,” Greenfield said.

But longtime cable industry analyst Steve Effros understands the holdup over mobile rights. He said many questions still exist about mobile viewing patterns, which make cutting deals in a mobile environment much trickier. Those types of questions, he said, have been holding up these types of deals for a couple of years.

“Nobody has a real business plan for this type of viewing, and everyone is afraid of what they don’t know,” he said. “People aren’t watching games on their cell phones and there’s not much evidence that they will.”

For cable operators, the Verizon deal feels like déjà vu. They have spent decades complaining that the NFL sells its out-of-market package, Sunday Ticket, exclusively to their biggest satellite competitor, DirecTV.

Now, the league is selling mobile content — again, exclusively — to their biggest telecom competitor. The NFL is locked into its Verizon deal though 2013, and Verizon aggressively marketed its NFL content deal in cable markets this season.

The lack of carriage casts a pall on what should have been a celebratory year for NFL Network. It has more distribution than any other league-owned network, counting nearly 2 million more homes than MLB Network. And its live game programming set viewing records in 2010.

NFL executives clearly expected more, particularly after the league signed a deal with the country’s biggest cable operator, Comcast. The lack of wide distribution in major media markets like New York City and Los Angeles, also hurts.

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