SBJ/December 5-11, 2011/Leagues and Governing Bodies

Another jackpot for NFL

TV renewals near; rights fees expected to jump at least 60%

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The NFL is about to hit pay dirt. Again.

The league is close to renewing TV deals with all of its broadcast partners that will result in massive rights fee increases of more than 60 percent across the board, underscoring the unrivaled strength of NFL programming.

For the first time, each of the broadcast networks will pay an annual average of at least $1 billion for the rights to carry NFL games. The expected windfall from CBS, Fox and NBC will be worth more than a combined $24 billion over the next eight years.

The league can hold back more games from Fox and CBS as part of the broadcast agreements.
Photo by: HUNTLEY PATON
Sources expect the deals extending through the 2021 season to be finalized this month, though a formal announcement may come later. The broadcasters’ current deals end after the 2013 season.

The size and scope of these deals offer further proof of the stunning power of NFL programming, which makes up the highest-rated shows on TV. Looking at the total revenue from the next round of national media deals puts the immense nature of the deals into better context. Combined with ESPN’s annual average of $1.8 billion a year for “Monday Night Football,” DirecTV’s out-of-market “Sunday Ticket” deal, the league’s planned Thursday night game package that it is preparing to shop, Sirius Satellite Radio, Westwood One radio and Verizon’s mobile deal, the NFL could wind up generating close to $7 billion annually in national media revenue starting in 2014. That represents a whopping 64 percent increase over the $4.28 billion that the NFL received from national media before the most recent round of renewals.

In fact, the $7 billion figure is more than the league’s total combined revenue from just a few years ago.
The league’s huge rights fee increases are coming far quicker than even the most optimistic projections. In February, Moody’s Investor Services predicted that NFL media money would hit $8 billion annually over the next two renewal rounds. With these deals, the league will close in on the figure after just its first renewal round.

No deals have been signed. But the NFL and its broadcast partners have agreed to general deal terms that are similar to the NFL’s deal with ESPN, which was announced in September at a 63 percent increase. The broadcast deals will be eight years in length, sources said. The networks will get more inventory for those payments, as they will obtain the rights to show games on tablets as part of the media industry’s TV Everywhere initiative — the idea of being able to watch TV no matter where you are on broadband and wireless devices.

Broadcasters expect to be able to offer games on tablets as soon as next season. But sources said the two sides have not reached agreement on that point yet. Broadcasters also have pushed for the rights to stream games to mobile phones, but the league sold those rights exclusively to Verizon last year.

Spanish-language rights are being negotiated at the same time. Currently, ESPN Deportes carries “Monday Night Football” in Spanish and Telemundo carries some “Sunday Night Football” games in Spanish. Currently, none of the NFL’s Sunday afternoon games are available on Spanish-language networks in the United States. It’s not known how the Spanish-language rights will shake out.

As part of the broadcast agreements, the league has the right to hold back more games from CBS and Fox. It’s believed that the league will use those games to create an early-season eight-week package on Thursday nights. The league is expected to shop that package to cable networks next year.

All deals have been negotiated on the basis of a 16-game schedule. None of the deal terms contemplate expanding to an 18-game schedule, sources said. If the league expands to 18 games, it’s not known if it would be able to charge additional fees.

NFL Commissioner Roger Goodell has said he hopes to begin flexible scheduling of the Sunday night game earlier in the season, which means CBS and Fox, potentially, could be ceding more high-profile games for NBC’s “Sunday Night Football.”

The pending deals are expected to close by the end of the month and could be ready for a vote as soon as next week’s owners meeting in Dallas.

While the incredible TV ratings of NFL games clearly are fueling the growth in the league’s media rights fees, the emergence of the TV Everywhere concept is a major factor in the escalating numbers. Media companies are willing to pay for programming that they can get to consumers through different viewing mediums.

Currently, in the U.S. the only NFL games that can be viewed away from traditional TV are the Thursday, Sunday and Monday night games. Verizon customers can view those games on their mobile devices. Verizon has exclusive mobile rights to NFL games as part of a four-year, $720 million sponsorship deal signed last year. Verizon’s exclusivity keeps any of the networks from streaming games to mobile phones. The Sunday night and Monday night games are available on broadband sites.

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