Will ABC Sack ‘Monday Night Football’?
Is Walt Disney Co. running out the clock on “Monday Night Football” on ABC?
The 34-year-old sports classic is ABC’s most popular and longest-running prime-time program -- a tradition that began in 1970 when ABC’s legendary sports producer Roone Arledge put Howard Cosell, Don Meredith and Keith Jackson in the broadcast booth.
In recent years, though, the struggling Disney-owned network has been losing about $150 million annually on “Monday Night Football.” ABC pays the National Football League $550 million a year for the rights to air the Monday matchups, but advertising revenue doesn’t come close to covering the costs.
Now, with Disney executives under pressure to prove to Wall Street that they can reverse the fortunes of the fourth-place network and turn a profit by next year, they must decide whether the benefits of “Monday Night Football” outweigh the financial losses.
“ABC is between a rock and a hard place,” said Brad Adgate, research director for the advertising buying firm Horizon Media. “It’s been ABC’s highest-rated show, but at some point they have to ask: How much is too much?”
The NFL has been meeting with network executives in recent weeks to start hammering out a new TV rights package that probably will exceed its current eight-year pacts, which total $17.6 billion and expire at the end of the 2005 football season. NFL executives had wanted to negotiate new agreements this fall, before they begin contract talks with the players union, because the network advertising market has been strong.
But Disney told the league it was not ready to deal. Instead, Disney executives want to wait until next year -- closer to the October 2005 deadline -- to renegotiate NFL contracts for ABC and sister network ESPN.
Disney also pays $600 million a year for ESPN’s rights to Sunday night games, the Pro Bowl and other NFL-related events. Unlike ABC, Disney’s cable sports empire doesn’t lose money on football because ESPN is hugely profitable, collecting cable subscriber fees in addition to ad revenue.
“We do not expect formal talks to begin until the end of this upcoming season,” said ABC Sports spokesman Mark Mandel. He declined to say whether Disney executives had reached a decision on whether to renew ABC’s deal for “Monday Night Football.”
Privately, Disney sources concede that the decision could “go either way.” Despite being a marquee program with plenty of sentimental value, “Monday Night Football” has tripped up ABC’s prime-time programmers, who struggle each year to come up with shows that will work in the show’s time slot once the regular NFL season ends in late December.
NFL executives won’t say how much of an annual increase they are seeking from the networks. Estimates range from as low as 5% to as high as 20%.
ABC, which analysts say is losing about $250 million a year, $150 million of that from “Monday Night Football,” might be hard-pressed to swallow another gargantuan NFL fee increase -- even though the program has been the network’s top-rated show for the last three seasons.
Ratings for “Monday Night Football” have slipped over the last decade, although viewership has stabilized since 2002 with the hiring of John Madden to join play-by-play announcer Al Michaels.
“I don’t think [ABC will] continue to absorb the kind of financial losses that ‘Monday Night Football’ has sustained,” said sports marketing consultant Neal Pilson, a former head of CBS Sports.
“The economics of the television marketplace are not strong enough to support the cost of the NFL contract, and it doesn’t look like it’s going to get any better,” Pilson said. “This is a marketplace with no set prices, no rate cards. It’s what people will pay for the rights to broadcast these games.”
The NFL’s two other broadcast partners -- Viacom Inc.'s CBS and News Corp.'s Fox Broadcasting Co. -- are happy to have football and willing to renew their rights packages, network sources say, despite the sometimes lopsided economics of football.
Two years ago, News Corp. took a $387-million charge against its earnings for losses on its eight-year, $4.4-billion NFL contract. But that didn’t faze media mogul Rupert Murdoch or his Fox network, which pays the league $550 million a year for its package.
Fox has long had a soft spot for the NFL. The upstart network didn’t get much respect in the industry until 1994, when it beat out CBS and grabbed the weekend National Football Conference games and playoffs for $395 million a year. The NFL would become Fox’s ticket to the big time, bringing new affiliate stations and higher ad revenue.
“Fox built their business on losing money on the NFL,” said Paul Swangard, managing director of the Warsaw Sports Marketing Center at the University of Oregon. “The thought has been that a network isn’t really a major network unless it has major sports as part of its programming package.”
CBS found that out the hard way. After the network lost out to Fox, CBS executives watched affiliate stations defect and their prime-time fortunes plummet. Four years later, when the NFL contract came up again, CBS was willing to write a big check.
CBS now pays $500 million a year for the rights to American Football Conference games and considers it money well spent. CBS maintains that it makes a small profit on football when factoring in the benefits to local stations. The network credits the NFL games for attracting younger viewers and giving it a platform to tout its prime-time shows, such as the popular “Everybody Loves Raymond.”
There are several scenarios for how the NFL might divvy up its next TV rights package, according to sources close to the negotiations.
Disney might move “Monday Night Football” to ESPN and give up the cable channel’s Sunday night package. That could create an opportunity for another cable channel, such as Time Warner Inc.'s TNT.
The NFL might schedule fewer Sunday night games. That way the league could reintroduce prime-time games on Thursday nights, when advertisers are willing to pay higher rates to reach viewers before the weekend.
One wild card is whether NBC Universal, which lost football in 1998, would be willing to get back into the game if “Monday Night Football” or another NFL package becomes available. Top executives at the General Electric Co.-owned network have met with NFL officials, although network executives stress that they’re not willing to lose hundreds of millions of dollars just to have football.
Since NBC’s association with the NFL ended, the company has added several cable channels. Sources say NBC executives might be interested in an NFL package for their newly acquired USA Network. Putting football on USA could give NBC more leverage to negotiate higher cable subscriber fees for that channel.
In the end, though, the NFL has an interest in maintaining its current partnership.
“The NFL and ABC created the longest-running prime-time entertainment series in television history,” NFL Commissioner Paul Tagliabue said in a statement, in response to questions about the current contract negotiations.
And ABC might not be willing to part with its most durable program.
“ ‘Monday Night Football’ is a good investment for ABC,” said Dean Bonham, chief executive of Bonham Group, a Denver-based sports marketing firm. “It’s a great property and one of the longest-lasting traditions in all of sports. And [it] reaches an important audience, particularly young men.”
The value of fetching such a large male audience is hard to ignore, said Jason Maltby, co-executive director for national TV buying for ad agency MindShare.
“Shows that deliver that many men are few and far between,” Maltby said. “The ultimate value that ABC gets is the ability to cross-promote their other shows.”
Although sports contracts have become increasingly expensive, there might be a payoff down the road, said media analyst Tom Wolzien of Sanford C. Bernstein & Co. If ad-zapping, TiVo-like recording devices become more mainstream, advertisers probably will pay a premium to advertise on programs such as live sports that viewers will watch in real time.
“Over time, what the networks can charge for commercials during live sports can be bid up,” Wolzien predicted.
Some owners of ABC affiliate stations, their patience wearing thin as the network’s sinking prime-time ratings have affected their revenue, say re-upping for “Monday Night Football” should be a no-brainer. In recent years, ABC affiliate stations have chipped in $34 million to help pay for ABC’s NFL contract.
“If they are serious about fixing the network -- and I think they are -- then fixing the network doesn’t equate to losing ‘Monday Night Football,’ ” said Darrell Brown, general manager of ABC affiliate KMGH-TV Channel 7 in Denver.