Experts Skeptical of Time-GE Game Plan
Sports experts and analysts on Friday said they doubt that Time Warner Inc. and General Electric Corp.'s NBC unit could mount a new football league to compete against the NFL because of the huge financial risks.
But some industry and company sources cautioned against writing off any effort by two of the world’s most powerful corporations, saying that certain circumstances could play to their advantage.
The companies said they are exploring ways to create a new football league after losing the rights to televise NFL games earlier this month.
The National Football League signed television contracts with ABC, CBS, Fox and ESPN worth $17.6 billion over eight years--more than doubling the value of the previous package.
Earlier attempts to compete with the NFL have gone up in flames, in part because of the difficulty of finding star players to provide fans with a viable alternative.
“New leagues are hard to get off the ground and keep going,” said Brian Schecter, analyst at Paul Kagan Media Sports Business. “Every one failed miserably, losing hundreds of millions of dollars, despite, at times, TV backing.”
But NBC and Time Warner have deeper pockets than parties that have tried to launch competing leagues in the past. And other media interests could also be brought into the fold, including cable operators that face dramatic increases in their payments to ESPN at a time when the federal government is pressuring them to hold consumer rates in check.
Furthermore, stadiums are idle in several major cities lacking NFL teams, including Los Angeles, giving a newcomer an ample launching pad.
NBC said the study will continue for at least eight weeks. Time Warner spokesman Ed Adler said the companies have held talks but declined further comment. The NFL declined to comment.
One source said the companies disclosed their discussions this week to elicit interest from other companies and individuals who might want to invest in teams.
Time Warner Vice Chairman Ted Turner told USA Today that the company’s TBS and TNT cable channels along with NBC were researching the feasibility of a league of 10 to 12 teams in major cities that could begin play in the fall of 1999.
TNT, which has split the NFL package with ESPN for the last eight years, was edged out by its sports rival in the recent round, when Walt Disney Co. agreed to pay $9.2 billion over eight years for both the cable package and Monday Night Football for its ABC television network.
Likewise, NBC refused to match rival CBS Inc.'s $500-million-a-year bid for games of the NFL’s American Football Conference, and lost out on Monday Night Football after ABC agreed to pay $550 million annually. NBC projects that all winning bidders will lose between $150 million and $200 million a year on their NFL packages.
TV networks have helped create leagues before. The American Football League began play in 1960 with the blessing of ABC, which didn’t have the rights to NFL games. The AFL merged with the NFL in 1968.
News Corp., which owns the Fox Network, helped form two professional rugby leagues in Australia and the South Pacific.
CBS, meantime, toyed with the idea of starting a new league after it lost NFL rights four years ago. That effort eventually died after a lack of support.
“There are probably better opportunities for the money,” said investment banker Paul Much. “It would take tremendous capital requirements and a whole lot of execution.”
The most notable effort was the United States Football League, which was founded in 1982 and played three seasons. The USFL, which played its games in the spring, had solid TV ratings, though its owners outspent one another in pursuit of marquee players and sent the league into financial ruin.
The World Football League played two seasons, in 1974 and 1975. It failed because it was undercapitalized, avoided NFL cities and lacked TV exposure.
Bloomberg News contributed to this report.