ESPN reaches $15-billion deal with NFL
Just hours before the opening kickoff of the new NFL season, ESPN reached a $15-billion-plus deal with the league to continue airing its popular “Monday Night Football” program through 2021 — and also for the first time bring those games to the iPad.
The eight-year agreement will cost the Walt Disney Co.’s sports network $1.9 billion a year — up a whopping 72% from what it is currently paying, according to a person familiar with terms of the deal.
Such a significant increase underscores the growing value of live games in attracting television audiences, as well as the importance of emerging digital platforms.
Analysts predict that ESPN will use its expanded NFL programming to justify future rate hikes from cable and satellite distributors — which ultimately could translate into higher fees for consumers.
“ESPN has the bulk of their affiliate agreements coming due in 2012 and 2015,” wrote media analyst Michael Nathanson of Nomura Securities Co. “We would expect ESPN to use the NFL again for another round of price increases.”
David M. Carter, director of USC’s Sports Business Institute, said that while some might experience “sticker shock” when they look at the magnitude of ESPN’s sports rights payment, the network has the ability to wring value from the NFL programming by distributing it on television, radio, print, online and mobile platforms.
“Nothing related to the NFL will hit the cutting room floor,” Carter said. “They are able to take all of that NFL content and spread it across all its business units … to ensure they will be able to make money from this deal.”
Under terms of the deal, ESPN will gain rights to an additional 500 hours of NFL programming — enabling the network to expand some of its existing shows, including the pregame “Sunday NFL Countdown,” and launch new ones such as “NFL 32” and “NFL Kickoff,” which debut this week.
ESPN also gained expanded rights to carry game highlights on TV and online, and to air the Pro Bowl, the NFL draft and an option for one postseason wild card playoff game.
Enhanced international rights clear ESPN to televise “Monday Night Football” and other regular season games, playoff contests and the Super Bowl to 30 million households in such overseas markets as Brazil, the Caribbean, Africa, the Middle East, Australia and New Zealand, and continental Europe.
“The scope of the digital rights we have, the length, the international expansion — it really fuels our company 24/7,” said ESPN President George Bodenheimer. “‘Monday Night Football’ is obviously a TV icon and drives substantial viewership every Monday night. We’re thrilled with the deal as it’s constructed.”
The other networks that carry the NFL will similarly face increases when they renew their deals. News Corp.’s Fox shells out $730 million annually, and CBS ponies up $625 million for its Sunday afternoon games. Each of the three could end up joining ESPN in paying 10 figures per season by the time their contracts expire.
Sports rights have become so expensive, in part, because ratings for just about everything else on TV have diminished. Live events still draw big numbers, particularly NFL games, each of which attracted an average of 18 million viewers last season.
Last year, “Monday Night Football” drew an average of 14.7 million viewers, receiving the highest ratings among men ages 18 to 49. Advertisers pay a premium to reach those viewers.
Moreover, viewers watch the events live — an increasingly rare phenomenon, as more than one-third of American households have access to digital video recorders that allow people to delay viewing (and skip commercials).
“It has all of the obvious benefits,” said Craig E. Moffett, an analyst with Sanford C. Bernstein & Co. “It doesn’t lend itself to ad-skipping or latent viewing. It’s programming that people are willing to pay a premium to see in high definition, on a large screen, in real time.”
