CBS Stations Agree to NFL Payout

After long and contentious negotiations, CBS’ affiliates agreed Friday to help the network pay for its new $500-million-a-year National Football League package.

The majority of the station executives at CBS’ annual spring affiliates meeting this week in Los Angeles agreed to an approach in which they will get an estimated $10 million or more in coveted prime-time commercial spots in exchange for contributing roughly $27 million in cash.

Still, Friday’s agreement is less than CBS’ initial request for $40 million to $50 million to offset the record eight-year contract the network signed in January to obtain football after a four-year absence.

Executives at Fox and ABC have been closely watching the CBS meeting, as both networks have similar proposals on the table that will be discussed at their June meetings with affiliates. The networks are all eager for help, not only because of the unprecedented $18-billion combined price tag for NFL rights (and the dimming prospects of getting the 20% to 30% increases in advertising rates they need to break even on the deal), but also because of their own ailing finances. Advertisers expect increases in the single-digit range, meaning that analysts’ estimates that each network will lose $150 million a year on football may be conservative.

CBS and its affiliates suffered heavily from the loss of NFL rights to Fox four years ago. A dozen key affiliates jumped ship to Fox, CBS’ ratings dropped, and the audience it drew was older, poorer and more rural.

“This is historic because it was done on the ashes of several other proposals that crashed and burned,” said Alan Bell, president of Freedom Broadcasting, which owns five CBS affiliates. “This is the end of the cutting era ushered in by [onetime CBS owner] Larry Tisch and the beginning of the cut and paste that will give us something back and make us whole.”

Under the agreement, CBS affiliates will give up $27 million of the roughly $200 million in compensation the network pays them to carry its programming. Stations in cities with National Football Conference and American Football Conference teams will pay what Bell characterized as a surcharge for the benefits accruing to them as home-team affiliates. The affiliates will also give back to CBS an advertising spot during “Late Show With David Letterman” and two more during “This Morning” to sell on a national basis.

In return, the network will give each affiliate one spot in prime time every night to sell on the local level, where they can command premium rates.

Bell said the exchange helps CBS without hurting the affiliates--something two previous proposals failed to achieve. CBS got off track with its affiliates shortly after signing the NFL deal by interpreting their eagerness to lure back football as a willingness to contribute to the bill. The head of the affiliate board riled CBS station owners by overstepping his authority as an advisor by suggesting that the affiliates were ready to pay up.

Tension built as certain affiliates and the network used the press to send messages back and forth. Sources said CBS executives such as Chief Executive Mel Karmazin were simply naive as newcomers to network television about the delicate art of affiliate politics.

CBS held meetings during the last two weeks with its dozen largest station group owners to defuse emotions, and those executives took the lead to hammer out an agreement this week.

ABC has floated the idea of a similar advertising inventory swap with affiliates, but it may be harder pressed to get affiliates on board. Affiliates are resistant to paying for the same “Monday Night Football” package they had last year at no charge.

While Fox was hoping to get a $40-million contribution, affiliates are using their leverage to extract concessions such as formal exclusivity agreements on football and other programming.

As part of its agreement, CBS agreed to give its programming to affiliates exclusively for a set period, limiting the network’s potential for repackaging its existing content for alternative media such as cable and the Internet.