As NFL’s TV Fees Spiral, ABC Hangs Onto the Ball

In pitched bidding Tuesday that underscored the staggering amounts broadcast companies are willing to pay for professional sports, ABC agreed to shell out more than $4.4 billion over eight years for the rights to broadcast National Football League games on Monday nights.

The bid, which doubles the rate ABC is now paying, came on the heels of CBS and Fox each agreeing to payouts of $4 billion or more over eight years for national football broadcasts. In a separate bid, the ABC-owned cable network, ESPN, secured exclusive cable rights to 18 Sunday night NFL games a year at a price higher than any single broadcast contract--$4.8 billion over eight years.

Broadcast industry analysts say it is impossible for the companies to recover such sums by selling advertising, guaranteeing each of the networks a loss, potentially large, on these deals.

The premiums being paid for football rights reflect the unique power of sports in consistently bringing in mass audiences at a time when a proliferation of cable channels is splintering viewership and eroding the market share of the major broadcast networks.

In essence, the networks justify overspending on sports rights to bring people in the door to build strength in the rest of their business, in much the same way that a supermarket might offer a deep discount on a popular item to bring in customers who will fill their carts with other goods.

“Monday Night Football,” for example, can be used as a platform to promote ABC’s prime-time shows for the rest of the week and to attract the hard to reach male audience. And CBS is expecting viewers to flock to its stations in such markets as New York and Miami once it begins airing Jets and Dolphins’ games.

“These contracts show the power and proprietary aspects of sports,” said Robert Gutkowski, chief executive of the Marquee Group, a New York sports marketing company. “Dynamic programming is getting harder and harder to find on the networks. I can’t even fathom these numbers. The question for the networks is no longer ‘How much can we make?’ but ‘How much can we accept losing?’ ”

The furious talks this week left NBC without any rights to broadcast professional football. Analysts said that NBC, which is the strongest network, may have the least need for professional football because of its other leading sports franchises, namely basketball.

TNT, which has been splitting cable rights with ESPN, also was left out in the cold. ESPN won the exclusive rights by more than doubling the $265 million yearly that ESPN and TNT now pay. Some sources say that the NFL agreed to let ABC keep the Monday night package despite aggressive bidding by NBC if ABC paid through the nose for the exclusive cable contract.

The new contract makes the Walt Disney Co., which owns both ABC and ESPN, a powerhouse in football, with a cable and broadcast package that can be cross-promoted to build viewership and sold as a bundle to advertisers. The combined rights will cost Disney $9.2 billion over eight years--higher than the combined value assigned to the ABC network and ESPN in Disney’s purchase two years ago of Capital Cities/ABC.

The soaring rates continue the pattern established four years ago by Fox, which agreed to pay $400 million a year to wrest National Football Conference games away from CBS. Although analysts say Fox has been losing more than $100 million a year on that package, the company believes that the benefits far outweigh the losses. The rights immediately established Fox as the fourth network, giving it a showcase to promote its prime-time programming and allowing it to broaden its audience beyond young viewers and to lure powerful affiliates away from CBS.

Fox agreed Monday to an increased rate of $550 million a year to renew its NFL package for eight years.

Under the new contracts negotiated this week--and which take effect in time for the start of the 1998 football season--the NFL will take in close to an astounding $18 billion over eight years from broadcast and cable networks. Such numbers are sure to bear on ongoing labor negotiations with NFL players.

Sources say the league doubled the length of the contract so the networks would feel more pressure to stay in the game for fear of being sidelined for nearly a decade. Under the new contract, the NFL has the option to open up bidding again after the fifth year, but is assured of hefty fees from existing rights holders even if the economy turns downward.

While the ratings for NFL games have declined, they have not dropped nearly as dramatically as prime-time viewership. And franchises such as “Monday Night Football” deliver larger audiences than most shows in prime time, consistently ranking in the top 10 most widely viewed programs. Football is a dominant ratings winner on cable as well.

Although CBS executive Mel Karmazin insisted that the company would make “at least a dollar” on its commitment to pay $500 million a year for AFC games, most analysts say football is a loss leader.

“Fox paid these high prices four years ago to build the network and now CBS is paying to rebuild,” Gutkowski said. “The word build is usually in the equation and that’s why a network like NBC was a less-motivated bidder.”

Late in the day Tuesday, after NBC submitted a bid “approaching $600 million” a year for Monday night games, some analysts suspected that the network was simply trying to raise the costs for ABC, which couldn’t afford to lose the surest spot in its otherwise weak prime-time schedule.

Analysts say while the loss of the AFC contract will hurt NBC, the network has two strong sports franchises--the exclusive National Basketball Assn. broadcast contract at a cost of $1.75 billion over four years and Olympics games well into the next century. By not paying for football, NBC also will have more to spend to keep “ER,” its top-rated medical drama that could cost $10 million an episode in renewal negotiations in March.

But Rupert Murdoch, speaking in New York, said losing football leaves NBC “even more at the mercy of Warner Bros. with ‘ER.’ ” The News Corp. chairman is eager to snap up “ER” for Fox.

CBS, whose ratings have suffered since losing football, may have had the most at stake.

Karmazin, the president of CBS’ station group, said the network had an advantage in bidding because it owns seven stations in AFC markets, compared to NBC’s three. CBS stations, such as in Boston, Baltimore, Pittsburgh and Denver, should get a huge lift in advertising revenues from airing AFC games.

When Fox grabbed the NFC contract from CBS four years ago, it led to a seismic shift in the affiliate lineups of all the networks, damaging CBS the most. Such a reshuffling is not expected to happen this time because the networks have long-term contracts with their affiliates and because the AFC cities tend not to be as large as those with NFC teams.

Analysts said the NFL could also help CBS in its quest to reach younger viewers.

While TNT said it would miss the strong ratings that NFL games bring, it could not justify the price ESPN was willing to pay for the entire cable package. “We had a sound economic model and we weren’t willing to break it,” said Brad Siegel, president of TNT, which is owned by Time Warner Inc. “We have been prepared for this, with more network premieres of theatrical and original series, and we also have the exclusive NBA cable package.”

Times staff writers Larry Stewart in Los Angeles and Jane Hall in New York contributed to this report.

* NFL’S NEW ORDER: New TV deals will pay the NFL $17.6 billion, and the effects will be widespread. C1