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Volume 21 No. 1
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Networks cry foul at NFL-Verizon streaming

NFL executives received an earful from their TV partners when the league informed them of the plan to sell Verizon the rights to stream all NFL games to their mobile phone users starting in 2014.

Agitated media partners pushed them on how the league was further diluting the most popular programming on TV. It was the same argument the league heard when they launched NFL RedZone and expanded NFL Network’s Thursday night package to a full season.

“When I pushed back, they asked me how my TV ratings were,” one exasperated TV executive said last week after the NFL announced the whopping four-year, $1 billion extension of its NFL rights deal. The deal represents a 40 percent increase over the four-year, $720 million deal Verizon signed in 2010 that allowed it to stream NBC’s “Sunday Night Football,” ESPN’s “Monday Night Football” and NFL Network’s “Thursday Night Football.”

With the new deal, Verizon gets access to the Sunday afternoon schedules from CBS and Fox for in-market streaming as well as the playoffs. The deal also allows Verizon to develop an NFL app and pick up the tab for wiring many league stadiums for increased connectivity.

As the NFL expanded its content to more channels and more platforms in recent years, the league has become the most popular programming on TV. When TV network executives complained that more games available on mobile phones could harm the TV product, the gripes fell on deaf ears.

NFL ratings were down slightly last season on CBS, ESPN, Fox and NBC compared with 2011, but they still were the strongest marks on television, with NBC’s “Sunday Night Football” and ESPN’s “Monday Night Football” continuing to be the biggest prime-time shows on broadcast and cable, respectively.

“There once were fears of TV rights cannibalization, but obviously that has disappeared,” said Chris Russo, the former NFL senior vice president of new media, who engineered Sprint’s content deal with the NFL in 2005. “We’ve gone from highlights and ring tones on cell phones to showing every game.”

Insiders note that the media partners had a chance to scoop up the mobile rights, as the league offered to sell the rights to them, but they balked at what they considered an exorbitant price tag.

Many analysts now feel Verizon stands to profit from this deal in ways that the TV networks can’t.

“A lot of people will select Verizon because of NFL content, similar to the way DirecTV grew with its NFL exclusive content,” Russo said. “Cell customers are worth a couple of hundred dollars a month to big carriers, and this is a good way to keep them.”

TV network executives said the length of Verizon’s deal, at four years, gives them a sense of relief. If Verizon starts to cut into NFL programming, they can address problems in four years. By comparison, TV networks’ rights deals run into the next decade.

“You could argue that this deal will fragment NFL programming, which could impact ad dollars,” said David Bank, managing director of equity research for RBC Capital Markets. “But of all the major sports, football is the definition of appointment viewing. I am not at all worried about the NFL’s audience fragmenting.”

What is certain to change is how leagues and teams view mobile phone rights. With the NFL having set this new bar, sports properties will reassess what their cell phone rights are worth.

“The trickle down will be interesting, especially among big colleges. Everyone talks about the small screen not being much, but if everyone has a small screen with them at all times, the definition of value has to change,’’ said Leslie Gittess, of New York consultancy Blue Sky Media. “You are talking about a billion-dollar deal which doesn’t include tablets? Watch that space.”

The TV partners have retained the right to stream their games to tablets and computers, just not to mobile phones. DirecTV also has a deal to stream every NFL game as part of its four-year, $4 billion deal to carry Sunday Ticket. DirecTV’s deal is not affected by the Verizon deal, sources said, but that is the next deal to watch, as the league is negotiating a new deal for Sunday Ticket.

Not all properties are created equal. The NFL is powerful enough to command a subscription model, but if cell streaming fees continue to escalate, it could be a catalyst for the development of a meaningful advertising model for mobile devices.

“There’s a powerful ad market demand for mobile devices, but it remains underdeveloped,’’ said former NHL executive vice president and COO Steve Solomon, who now heads consultancy SJS Sports. “The ad model on the digital side overall has been slow, and the mobile ad market is behind that. You’d think sports will push that, but it is still an uphill march.’’

The line between media and sponsorship deals has been blurring for some time, but this deal portends a time when traditional sponsorship assets are the tail on the dog.

“All other sports and entertainment properties are continuing to chase the NFL from a rights and content monetization perspective,’’ said Andrew Judelson, IMG senior vice president, college national sales and U.S. business development, who cut telecommunications content deals while a marketer at Sprint and during his time as NHL chief marketing officer. “This deal further indicates that the line of delineation between IP sales, media sales and content sales is just a thing of the past.”