The NFL and the SEC remain several years away from their next round of media rights negotiations. Broadcast retransmission fees – which will drive those discussions – remain on the rise (see: Gray, Nexstar, Station Group) and there’s no reason to believe that the negotiating environment will be dramatically different by the time 2022 (when NFL deal expires) or 2023 (when SEC deal expires) rolls around. But the possibility that retrans pools stop growing – or even shrink – over the next three to four years isn’t 0% and if the league’s current broadcast partners are unable to command the distribution fees needed for a rights acquisition to make economic sense, the two rights holders could be looking at a decline in revenues earned.
Howie Long-Short: One well-respected media veteran explained that retransmission fees are “totally driven by the bundle and if a [rights holder is] betting on an increase [in the next round of negotiations], they’re not only betting that the decline of established bundles will be moderate [over the next several years], but that some sort of rebundling will take place – on the digital side in particular – and that their broadcast channel parters will be a part of it on a scaled basis.” That seems like a safe bet, as of today. Even with broadcast ratings in decline, the networks with NFL and SEC football games are among the most watched on television. But the risks associated with a reduction in retrans pool value over the next several years seemingly outweighs the potential rewards, so it would seem prudent for both rights holders to “arm their channel partners with the tools needed to get new distribution deals done and simultaneously guarantee their respective economics for the next four to eight years.” That’s the path MLB took last November, extending their deal with Fox Sports through ‘28. The PGA just did the same, announcing a new nine-year deal with current partners CBS and NBC.
The only logical reason for the NFL (or the SEC) to hold off on renegotiating their existing deals would be if the league felt confident that FAANG was going to be investing heavily in sports broadcast rights in the not too distant future – an unlikely proposition. “Amazon isn’t going to take a Sunday NFL package away from Fox. Facebook probably isn’t going to even be in [the sports rights] business because people don’t watch long-form programming on the platform.” If there are any viable digital players, they’re still experimenting with sports programming and [the possibility they’ll be bidding for exclusive rights is] still 4-8 years into the future. The NFL apparently understands what it’s up against, so don’t be surprised if/when the league announces new media rights agreements within the next twelve months.
It’s unlikely that the NFL or SEC would be leaving any money on the table should they wish to extend their existing retrans deals early as there simply aren’t any digital outlets prepared to outbid the existing rights holders – and even if there were, they would lack the reach desired by the two T-1 rights holders. Our source believes “with the rise of ESPN+ and NBC Gold, the NFL and the SEC [can get the digital reach they’re seeking] from their established partners.” Ultimately, the decision to sell exclusive digital rights may come down to whether the leagues want to trust their long-time partners or “be somebody’s experiment; and I don’t think there is a single tier-one league that wants to be somebody’s experiment.”
That doesn’t mean the digital players will necessarily be shut out during the next round of negotiations. While the most valuable rights packages will not going to FAANG on an exclusive basis, there may be room for one of the digital players to grab an incremental package or to partner with an existing broadcast provider where together they’re able to derive incremental value.
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