Just a few weeks before the National Football League Players Association voted to approve a new collective bargaining agreement back on March 15, media insiders were confident that a formalized peace offering would fast-track negotiations on the next round of broadcast rights packages. But any hopes of locking in those multi-billion-dollar TV and streaming pacts before the start of the 2020 NFL season were effectively scuttled by the coronavirus; on the same day the NFLPA signed off on the CBA, New York began the process of shutting down.
If the nation has since changed irrevocably since that Sunday in March, the NFL itself largely has not. To say that the league has an outsized impact on the media ecosystem is to traffic in understatement; given that its current broadcast fees alone generate more than $5 billion per year, the NFL is not so much the proverbial 800-pound gorilla as it is Mighty Joe Young. Which is to say, it’s not going to monkey around when it comes to maintaining its hegemonic reach. Advantage: TV.
When, in early June, the NFL hosted a series of informal meetings with its broadcast partners and no members of the FAANG (Facebook, Amazon, Apple, Netflix, Google) set were on hand to pitch their NFL wish lists to the league brass, it came as no surprise to the incumbents who were in attendance.
Despite the nattering of digital futurists and other Wall Street naysayers, the legacy broadcasters have reason to believe that they will maintain a stranglehold over football’s most prestigious time slots.
While the NFL has facilitated some digital dabbling as a means of getting its content out in front of a younger, TV-averse audience, ubiquity remains its mandate. After hearing some of the early rumblings about the possibility of a Silicon Valley power unseating a TV partner, NFL Chief Media and Business Officer Brian Rolapp threw some cold water on the FAANG fire. “Our entire model is about reaching as many people for as long as we can,” Rolapp said during a pre-COVID industry event. “We can reach 25 million people [on broadcast TV], and I have not seen a live event on the Internet that can serve 25 million concurrent users at a high quality.”
Indeed, NFL games are perhaps the only TV property that can still be said to function as a true reach vehicle. TV is now basically just a delivery system for football; according to Nielsen, the NFL in 2019 accounted for 41 of the top 50 most-watched broadcasts, and 73 of the top 100. The league’s most popular TV showcase, the national Sunday afternoon window shared by Fox and CBS, averaged a staggering 24.3 million viewers, up 8% versus the previous season’s 22.6 million- while NBC’s Sunday Night Football grew 4% to 20 million viewers. (By way of comparison, after its final regular-season game wrapped on Dec. 29, NBC’s Sunday primetime slate averaged just 2.31 million viewers.)
While Big Tech will continue to take nibbles at the NFL apple, a digital native isn’t likely to disenfranchise one of the established broadcast partners. FAANG’s participation in NFL matters has been limited to a sort of sidecar role alongside the big 122-horsepower hog that is TV; for all the hype about Amazon’s $200 million extension to stream Thursday Night Football through 2022, that’s a rounding error compared to what broadcasters are expected to shell out for their own renewals.
At a forecasted price hike of 80% over the rates hashed out in 2011, Fox will be on the hook for around $1.98 billion per year, while CBS ($1.8 billion) and NBC ($1.72 billion) can expect similarly dizzying payments.
There’s no way to downplay the significance of those expenses, especially when some of the broadcasters’ balance sheets may be found wanting. The slimmed-down Fox Corp.’s market cap as of Thursday morning was $15.2 billion; meanwhile, ViacomCBS’s value is currently $16.2 billion, down from $26 billion at the time of the merger. Both valuations are small potatoes compared to Disney’s $230.1 billion and Comcast’s $194.9 billion, and little more than chump change in light of Amazon’s $1.6 trillion.
CBS has already taken steps to shore up for another big NFL investment, punting on a renewal of its annual $55 million SEC package, which expires in 2023. Once high-roller Disney takes the wheel, the SEC rights portfolio will jump to some $325 million per year.
Speaking to investors Thursday morning during the company’s quarterly earnings call, ViacomCBS President and CEO Bob Bakish said CBS would do everything in its power to re-up with the NFL, noting that there are “many monetization vectors” in place to make renewal beneficial to both parties. “I am very confident that the partnership will continue to provide value to both sides, as it has for decades,” Bakish said.
Fox Corp. Executive Chairman and CEO Lachlan Murdoch on Wednesday made a similar show of nonspecific enthusiasm for the NFL, telling analysts that his team will “update the market as our negotiations with them come to a close.”
Aside from the advertising revenue generated by NFL games—discounting the dollars pinned to the Super Bowl, in-game inventory on Fox last season brought in $1.34 billion, per Standard Media Index data, while NBC raked in $850 million and CBS $788 million—pro football allows broadcasters to command big re-transmission consent and reverse-comp increases from the operators and affiliates that value the league’s massive reach.
Patrick Crakes, a former Fox Sports executive who now runs his own broadcasting consultancy, expects that while the NFL may choose to carve out an exclusive digital package along the scale of the Amazon deal (in addition to its Thursday night simulcasts, the e-retailer will stream one standalone Saturday afternoon game on Prime Video and Twitch), the next big rights deal will continue to put traditional TV at the front and center of the media mix.
The NFL’s reluctance to go all-in on a Big Tech deal is a reflection of the realities of the streaming business. “Sports is designed to be consumed in the moment, and that dynamic doesn’t really play out across these streaming platforms,” Crakes says. “If Google were to buy a window and put it on YouTube, where something like 40% of the views are music videos, in terms of minutes watched, it’d be like spreading a billion people a half-inch deep.”
In other words, the NFL isn’t terribly interested in sacrificing its vast engaged audience for a few bonus billions. “There are any number of ways to make money disappear, but the impact of moving one of the premiere Sunday NFL packages to streaming wouldn’t be worth the premium,” Crakes says. “Sure, Google could kick the can down the road as some sort of five-year experiment, but when you’re the NFL, you don’t need to experiment—certainly not at that scale.”
A better fit for a deep-pocketed FAANG service would be DirecTV’s $1.5 billion Sunday Ticket package, which could go on the resale market at the end of the upcoming season. AT&T execs have expressed a disinclination to keep paying through the nose for the out-of-market offering, saying that their ability to properly monetize the games is hampered by the limits imposed by existing streaming rights. Limited to the satellite-TV platform, Sunday Ticket is available to 18.4 million video subs, down from 22.9 million in the year-ago period. By comparison, when the NFL season kicked off in September 2019, CBS, NBC and Fox signals reached more than 103 million homes.
While Crakes can offer a dozen reasons as to why the digital upstarts aren’t all that interested in taking a deep dive into the NFL—for one thing, the infrastructure investment alone makes it next-to-impossible to turn a profit on streaming, and the Jeff Bezoses of the world don’t make a habit out of burning money just for the heck of it—the lack of top-drawer hires are the consultant’s biggest tell. “If Amazon were serious about sports, [FanDuel board member and entrepreneur] David Nathanson would be there already,” Crakes says. “If you’re going all-in, you need the talent, and they’re just not hiring any of the people who would be crucial to that sort of endeavor.”
Perhaps the smart play would be for an Amazon or Google to simply hang back and then buy out one of the legacy network groups after the new rights covenants have been secured. “The grand thesis of what I tell investors is, ‘the future looks like a lot of consolidation,’” Crakes says. “Fox or CBS could very well put themselves on the market, and getting the NFL rights will be part of that rollup.”