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Volume 21 No. 22

Media

C

BS and NBC lost a combined $100 million to $120 million per year on “Thursday Night Football,” according to a report released this month from Morgan Stanley.

Both broadcasters, who lived through the financials of the package over the last two years, knew enough about the economics to offer a lower rights fee to keep the package than the $450 million per year they previously paid, sources said.

When word came out that Fox agreed to a five-year deal where it would pay $550 million in the first year, with an annual 9 percent escalator (per a MoffettNathanson report), the instant reaction was that Fox overpaid. The company’s stock price fell by more than 4 percent the first day, from $38.46 to $36.90. But the stock price stabilized and went up the following day.

 

The reason for the stabilization may be that once financial analysts looked into the deal, they saw that it may not be as bad for Fox as originally thought. The deal still is worth a lot of money and carries a lot of risk. But it fits in with Fox’s strategy to bring more live programming to its broadcast network, and should help drive more retransmission consent revenue to the broadcaster.

 

Sources say the rights fee includes money for programming and services beyond the strict “Thursday Night Football” rights, such as enhanced digital rights and, potentially, a new wild card playoff game (see related story).

 

A source with direct knowledge of the deal also positioned it as closer financially to the previous deal than some reports have suggested. The source said the first-year rights fee is 10 percent to 15 percent higher than the final year of the CBS/NBC deal — a number that is in line with many sports rights deals.

 

The source said that CBS and NBC paid for other factors as part of their “TNF” deal — like the enhanced affiliate terms NBC parent Comcast granted NFL Network and the production costs CBS paid to house NFL Network’s morning show in its New York-based broadcast center.

 

Fox agreed to pay $550 million in the first year of a five-year deal for “Thursday Night Football.”
Photo: Getty Images

“The average annual is used as a barometer for how good a deal is, but it has the least bearing on how you run a business,” the source said. “The only things that matter are the costs in any year and the revenue in any year.”

 

A couple of financial reports also suggest that the deal ultimately will benefit Fox, through added retransmission consent fees and increased digital distribution.

 

“While the deal is costly (and will likely be a drag on near-term numbers), Fox is banking on ‘Thursday Night Football’ to accelerate its retrans revenue growth,” a MoffettNathanson report read. “Compared to CBS, Fox’s monthly subscriber rate was projected to lag in the years ahead and now (bundled only with Fox News and FS1) will be expected to accelerate at a higher rate. Given the length of the deal (five years), New Fox will likely be able to drive a stronger negotiation with station groups than CBS and NBC could in the previous two-year deals.”

 

The report included a warning that Fox already had Sunday afternoon football, “so we question the incremental value that ‘TNF’ brings to the table.”

 

The MoffettNathanson report also highlighted how the deal can help Fox’s prime-time lineup, which averaged 3 million viewers on Thursday nights last season. “Even outside of Thursday nights, we can see that no general entertainment show on Fox network last season even came close to ‘TNF’s’ average rating. ‘TNF’ could also help Fox with higher promotional awareness for the rest of its schedule.”

John Ourand can be reached at jourand@sportsbusinessjournal.com. Follow him on Twitter @Ourand_SBJ.

NFL Network’s hit morning show, “Good Morning Football,” is moving out of CBS’s Manhattan production facility by the beginning of April.

 

Network executives told the show’s crew last week about its plans.

 

As part of its “Thursday Night Football” agreement, CBS hosted the show in its CBS Broadcast Center since its August 2016 launch. Fox outbid CBS to pick up “Thursday Night Football” rights starting this fall, which means that the network no longer is contractually obligated to host the show.

 

But an NFL Network executive said the move was planned well before CBS lost the rights to Thursday night.

 

“I’ve known since Christmas that I wanted to move the show, whether CBS got ‘Thursday Night Football’ or not,” said Mark Quenzel, a senior vice president at NFL Media. “This has nothing at all to do with ‘Thursday Night Football.’”

 

“Good Morning Football” will move 12 blocks south and be part of the NFL Experience in Times Square. NFL Network is considering having a live audience during the show, though it won’t have one at the start.

 

“Our set will look out on the entire panorama of Times Square — it’s an amazing view,” Quenzel said. “All the energy in the background just reeks of New York.”

 

NFL Experience launched in December through a partnership between the NFL and Cirque du Soleil Entertainment Group. Quenzel said that when the show launches, it will be a 15-hour-per-week marketing platform for the Experience.

 

“Good Morning Football,” which is produced by Embassy Row, has been a breakout hit for NFL Network. The show’s main hosts — Kay Adams, Kyle Brandt, Nate Burleson and Peter Schrager — talk football in an entertaining way, rarely cover entertainment and don’t wade into politics. The show will retain the same format in its new digs.

 

The show was NFL Network’s first to originate from New York and outrated the network’s previous shows, like “NFL AM,” which was produced in Los Angeles.

— John Ourand

Fox Sports is in line to pick up an NFL wild card playoff game as part of its “Thursday Night Football” deal, sources said. It’s unclear whether the game in question is the one that’s been on ESPN and ABC for the past several seasons, but that’s the game that appears most likely in play.

 

Sources said no final decision has been made, though it’s the NFL’s decision — not ESPN’s — about whether to move it.

 

ESPN picked up rights to carry an NFL wild card playoff game starting in 2015 as part of its most recent “Monday Night Football deal. At the time, ESPN was eager to carry a playoff game — something it had never had before — and paid around $100 million per year for the right to it.

  

The rights deal, however, allowed the NFL to have periodic “look-ins,” where the league could propose changes or even pull back the rights. During its first look-in, the NFL convinced ESPN to simulcast the game on ABC, starting in 2016.

 

The NFL has another look-in this year, during which time it is considering moving the game off of ESPN.

 

The NFL alluded to the possibility of moving the game in the “Thursday Night Football” RFP it sent out late last year. In that document, the league asked broadcasters to bid on a playoff game, though it did not specify whether that game was ESPN’s.

 

Fox’s “Thursday Night Football” bid is believed to include considerations to carry that game.

 

ESPN executives may not balk at the idea of the game leaving its air, with several saying privately that they have not been able to make a profit on it.

 

ESPN has been looking to cut costs for more than a year, and the fact that ESPN is being guided by an interim president adds to the uncertainty about whether the network even wants the playoff game.

 

ESPN has carried the worst time slot of wild card weekend — the early game on Saturday — and its ratings have been the lowest of wild card weekend since it picked up the package.

 

This year, for example, the Titans-Chiefs game was one of the most exciting of wild card weekend, but averaged 22.1 million viewers on ESPN and ABC — the lowest viewership since the game’s been simulcast on two networks. In its first season in 2015, coverage of the Panthers-Cardinals was only on ESPN, and averaged 21.6 million viewers.

— John Ourand