SBJ/September 5-11, 2011/MediaPrint All
The NFL is talking with Time Warner Cable about NFL Network and NFL RedZone carriage, but sources say the two sides are no closer to a deal than they were a year ago.
The league has not had substantive talks with Cablevision recently, increasing the possibility that NFL Network will endure another season with significant distribution holes in major markets, including New York and Los Angeles.
Time Warner Cable and Cablevision are NFL Network’s two biggest cable holdouts. Time Warner Cable is the country’s fourth-biggest distributor, with more than 12 million subscribers; Cablevision is ninth, with more than 3.3 million.
There had been some optimism that the NFL finally would cut a deal with Time Warner Cable and Cablevision after a whirlwind summer that saw the league break a years-long logjam and sign deals with Charter and Mediacom.
With the addition of Charter, NFL Network could claim seven of the top eight distributors, including DirecTV, Dish Network, Verizon and AT&T. At a cost of 81 cents a subscriber a month, according to SNL Financial, NFL Network is in nearly 57 million homes.
The league’s optimism for finally working out a Time Warner Cable agreement came from a couple concessions it made in order to cut a deal with Charter, according to sources. The league relaxed its demand to be placed on Charter’s biggest digital tier, Digital View. Instead, it accepted carriage on Charter’s Digital View Plus tier, which is subscribed to by roughly 25 to 30 percent of Charter’s homes, sources said.
The deal also contains some TV Everywhere components, allowing Charter to make NFL Network available via broadband and tablets to authenticated subscribers as part of its deal. These rights have become part of standard cable industry clauses, but ones that the NFL had been fighting in recent years.
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.
A potential hiccup came from the NFL’s exclusive four-year, $720 million wireless deal with Verizon Wireless that was signed in March 2010. That deal, which streams content to mobile phones, pertains only to cell phones, not tablets. Charter’s deal potentially allows it to stream the channel to authenticated subscribers using tablets, sources say.
Sources also said the league’s decision to make RedZone Channel available to sports tiers also helped finalize the Charter and Mediacom deals.
It was July 18 when a team of PGA Tour executives, led by Commissioner Tim Finchem, first met with CBS in New York to begin TV renewal talks.
The next day, they took their presentation to NBC. Each time, Finchem emphasized the tour’s robust sponsorship sales, the amount of advertising it could deliver to the networks and the financials he sought.
Brimming with confidence, Finchem left a rough draft of a contract with each partner.
NBC will continue to take 10 events a year under the new deal, and CBS will take about 20.
Financial terms of the new deal were not available, but Finchem said increases were built in from year to year, which likely would move the annual revenue to more than $500 million a year.
The structure of the deal is similar, with CBS taking about 20 tournaments a year and NBC 10. There is, however, a significant upgrade in what the tour has planned digitally, including simulcasts of live TV broadcasts.
“The (financial) increases will help us in a number of areas,” Finchem said. “We’re going to be able to grow the financial benefits to players, it will allow us the flexibility to invest in digital applications, and we can invest in things that help the overall presentation of the tournaments.”
The tour took a calculated risk by going straight to its network partners to extend its current contracts rather than opening the bidding as most properties have in recent years.
But there didn’t seem to be an interest from Fox, and ABC wasn’t a candidate because it couldn’t acquire any content for ESPN, which is excluded by the tour’s exclusive cable deal with Golf Channel.
After an 18-month read of the marketplace, the tour decided to go straight to the table with its current and longtime partners in July. The tour opened the bidding to all networks before its last deal, but CBS and NBC were the runaway winners then, too.
“We just thought our relationships with CBS and NBC worked well and that’s what we were committed to,” said Ed Moorhouse, the tour’s co-COO and a leader in TV negotiations, along with a team of Executive Vice President Rick Anderson, Chief Marketing Officer Tom Wade, Chief Financial Officer Ron Price and general counsel Len Brown, among others.
Many of those team members stayed in New York for nearly the entire six-week period at the InterContinental New York Barclay.
Moorhouse went home to Ponte Vedra, Fla., for just two weekends from mid-July through last week when the deal was closed.
Members of the TV team worked out of rented office space on 56th Street, between Park Avenue and Lexington Avenue, which was an addition to some permanent office space the tour leases in the same building.
From that third-floor office, the tour worked through minimal snags, except when it came to the new digital initiatives it sought.
Pushing to become the most progressive property in the digital space, Finchem launched a bid to take golf beyond its traditional limits of broadcast TV.
The tour and the networks agreed that the TV broadcasts will be simulcast on other platforms, including online, smartphones and tablets.
PGATour.com will be one of the homes for the simulcast, but other applications will be developed.
When NBC has the tournament, the broadcast will run on NBCsports.com, while CBS’s tournaments will be broadcast on CBSsports.com. The tour and the networks are considering other possible online outlets.
Other revenue-related details still must be worked out. It hasn’t yet been determined if all of the advertising from the TV broadcast will run on the simulcast, or if those units will be sold separately. And if they are sold separately, who sells it and how will the revenue be split?
What Moorhouse does know is that the tour’s title sponsors will maintain their same position in the simulcast, as will FedEx, the tour’s umbrella sponsor.
The tour is not contemplating a subscription model for the live tournament simulcasts, but there could be some unique premium programming that is sold digitally.
Many of those questions will be answered in the next year as the tour works through another important negotiation with Turner Sports for the tour’s digital rights. Turner’s deal expires in 2012, and Moorhouse indicated that those rights will go to the open market.
Sources say the NFL already has started talks with ESPN, Fox, NBC and Turner. The league is planning to devote its full attention to the package once it completes a “Monday Night Football” extension with ESPN. The ESPN deal is virtually complete, with lawyers checking the details on a $1.8 billion annual deal that would keep the franchise on ESPN through 2022-23, sources say.
I see NBC Sports Network as a clear favorite to pick up the package, followed closely by Turner.
Comcast clearly has the money to commit to the package. The only question I have is whether NBC can actually afford it.
IDA MAE ASTUTE / ESPN
The “MNF” extension with ESPN is virtually complete, but a new eight-game NFL package is up for grabs.
Earlier this year, Versus committed $187 million per year to keep the NHL. That deal alone leaves $86.6 million in license fee money.
In order to get to the $700 million needed to get the NFL package, Versus would need to raise its license fee from 30 cents to about 75 cents. Given the distribution struggles NFL Network had when it first got an eight-game package, that seems like a tall order.
Here are the odds that I’m giving to the networks.
■ NBC Sports Network: 2-1
It’s clear that NBC wants the NFL and already has programmed several NFL-themed shows for its NBC Sports Network. My guess is that NBC and the NFL work out a deal that would give the league an ownership stake in NBC Sports Network. For the league, an ownership stake in one of NBC’s cable channels would be an easy way to bolster its media portfolio. For Comcast, it presents a way to get the league’s package without committing $700 million a year up front.
■ Turner Sports: 3-1
Turner’s David Levy has made no secret of his desire to carry the NFL, which TNT carried from 1990-97. Under Levy, Turner has been creative in cutting sports deals, such as with CBS for the NCAA men’s basketball tournament. Look for Turner to pursue a deal that gives Turner management responsibility over the NFL’s media, similar to Turner’s NBA deal. The NFL has toyed with the idea of giving up management responsibilities — or even an ownership stake — in NFL Network. Given its experience managing the NBA’s digital business, Turner would be a natural partner.
■ ESPN: 10-1
With ESPN committing $1.8 billion a year on “Monday Night Football” and highlight rights, it seems unlikely that it would commit $700 million more for an early-season package of eight games. I expect ESPN to stick around the bidding process to see if it can get a deal, but I don’t expect it to come close to winning the package.
■ Fox Sports: 15-1
Fox is the wild card, as it views sports as the surest way to grow FX. For example, the channel gets 44 cents a subscriber a month. TNT gets $1.16, according to SNL Financial. The NFL could help FX move into TNT’s neighborhood. The problem, according to sources, is that several big cable operators have surcharge protection in their deals with FX, which means that the channel would have to wait for these deals to end before it can reap a windfall. In the end, I’d be surprised if Fox’s bid comes close to what NBC and Turner will offer.
■ NFL Network: 50-1
NFL Network is increasing its distribution to the point where the NFL legitimately could consider putting the package on its own channel. But I see NFL Network as little more than a stalking horse that sticks around to help drive up rights fees.
John Ourand can be reached at firstname.lastname@example.org. Follow him on Twitter @Ourand_SBJ.