Forget about the $70 million that bettors are plunking down on the Jan. 26 Super Bowl between the Green Bay Packers and the New England Patriots. The biggest wagers on football have yet to be placed: At least six broadcast and cable networks are ready to mount major bids, each hoping to land one of the five National Football League contracts for television rights through the end of the decade.
Football is America's highest-rated TV programming, and big players from Time Warner's TNT to News Corp.'s Fox to Westinghouse's CBS all desperately want the rights (table). The networks routinely lose tens of millions on the deals because ad revenues don't come close to covering costs. But football is the quintessential loss leader. It improves networks' demographics for advertisers--namely, big-spending young men. The games also offer a stage for promoting prime-time shows and provide an unparalleled lead-in on otherwise slow Sunday nights.
STILL TOP DOG. With more suitors than packages, the NFL is looking at a windfall. Oakland Raiders owner Al Davis has predicted that the league will double its current $1.1 billion in annual TV revenue. Industry analysts say a still hefty 25% to 40% gain is more likely. "In my 40 years in the business, it's the best negotiating stance I can ever remember for a seller," says Barry Frank, the senior group vice-president at International Management Group (IMG) who negotiated the Major League Baseball contracts in 1995. Formal NFL negotiations will begin in the summer, though jockeying has already started.
It all serves as a reminder that football is still the king of sports. Yes, high-profile drug suspensions tarnished the league this year. And owners who can't agree on a long-term strategy for football have uprooted three teams in three years, angering loyal fans and leaving the huge Los Angeles market teamless. One result: The sport's ratings were down on all three of its networks this season. But the Packers/Patriots Super Bowl will nonetheless be the highest-rated program in Fox Broadcasting Co.'s history and probably the most watched TV program of 1997. Even the Jan. 12 conference championship game that NBC broadcast will likely end up as its top-rated single program of the year--and it wasn't even aired in prime time. Monday Night Football remains ABC's strongest show amid a weak prime-time schedule.
Sports is such a draw that beefed-up sports programming of all kinds is now key to most big media companies' growth plans. Walt Disney Co., which owns ABC and ESPN, launched a 24-hour sports-news network last year, as did Time Warner. News Corp.'s Fox recently started a regional sports network. When those startups are part of large companies that broadcast live football, they can gain quick legitimacy by borrowing announcers and airing other NFL shows.
MONEY TALKS. The established networks, meanwhile, won't be passive. NBC has a dominant sports operation that division President Dick Ebersol does not want to see slip. Westinghouse Electric Corp.'s CBS would take a loss to get the NFL rights back, says CBS Sports President Sean McManus, who was hired away from IMG with a mandate to recapture big-time sports. And since four of the networks--TNT, CBS, ESPN, and ABC--have changed hands since the last NFL contract, the bidding will show how much the owners are willing to spend on their new assets.
Industry sources expect ABC, NBC, CBS, Fox, ESPN, and TNT to bid for the five available packages--two of which are on Sunday afternoon, two on Sunday night, and one on Monday night. A lot is at stake. After Fox paid a stunning $395 million annual fee for CBS's package in 1993, CBS lost a platform to promote its prime-time lineup and its strong lead-in for Sunday night. A number of key local affiliates switched to Fox, leaving CBS with weaker stations in such markets as Dallas. Prime-time ratings fell 31% in two years, and 60 Minutes lost its standing as a top-10 show.
POTATO BAIT. This time, vows McManus, CBS will pursue the NFL to the end. "We will be as aggressive, if not more aggressive, than anybody else," he says. It's an uphill battle, though. CBS, as the only network without a current contract, can't get in on the negotiations until October, and the current holders of the rights may match any CBS bid.
For Fox, the NFL has been a huge boon, despite a $350 million write-off taken in 1995 to cover football losses. Fox has seen its prime-time viewership increase 7% since landing the NFL, as other broadcast networks' overall ratings have fallen. What's the connection between football and prime time? When you're on the couch in the front of the Super Bowl, count how many promos you see for Fox's show, The X-Files.
Of all the networks, though, ABC may be the most vulnerable. Its current Monday Night Football contract costs it $230 million a year. That price tag could come close to doubling, analysts say. MNF is a guaranteed prime-time winner for which a network can charge some $300,000 per ad spot. At ABC, "they have a lot of problems," says Alan Bell, president of Freedom Broadcasting, which owns two ABC affiliates, "and [losing football] is one they don't need to volunteer for."
NBC seems the least desperate--though it remains eager, since it, too, has slipping prime-time ratings. They are still No.1, and NBC holds the rights for five of the next six Olympics, the NBA, and baseball. Its Sunday afternoon NFL package is less valuable than Fox's because the teams it airs are in smaller markets. But those rights should still go for significantly more than their current $217 million annual price tag.
With so many bidders, the NFL could always try to create another slot for games--say, Thursday night--and sign up a sixth broadcaster. But that's unlikely to happen. "The chances of the packages being very different from what they are now is very slim," says Val Pinchbeck, the NFL's senior vice-president for broadcasting and network television. A new package would dilute football ad dollars and dent some of the networks' willingness to submit outlandish bids. "You've got to keep everybody hungry," IMG's Frank says. "The way to do that is to keep one guy on the outside." Whichever network that is will face a stiff penalty.