The National Football League has demonstrated again that it is the most valuable reality-based programming in the television industry today.
The NFL announced on Monday that Viacom Inc.’s CBS, News Corp.’s Fox, and satellite broadcaster DirecTV Group Inc. agreed to pay the incredible total of $11.5 billion to retain television rights to NFL games for the remainder of this decade. The deals represent an overall 40% increase compared with current contracts and reflect that professional football remains America’s most popular sports league despite the overall decline of broadcast-TV viewership.
The two broadcast networks will pay $8 billion combined over six years, through the 2011 season. Fox’s payments under its $4.3 billion pact will average $712.5 million annually, a 30% increase over the current deal’s $550 million average. CBS’s $3.7 billion deal averages out to $622.5 million a year, up 25% over its current $500 million average. Each network will air two Super Bowls under the new contract.
Moreover, the satellite-TV deal was a key to the renewals. DirecTV, which News Corp. controls, will pay the NFL $3.5 billion over five years through 2010 ($700 million a year), which is a substantial increase from the $400 million a year it pays now. The “NFL Sunday Ticket” package gives subscribers access to as many as 14 games a week.
The NFL’s current deals with Fox, CBS and Walt Disney Co.’s ABC and ESPN expire after the 2005 season. The league hasn’t announced extensions with ABC, which airs “Monday Night Football,” or ESPN, which shows a game on Sunday nights. ABC and ESPN have declined to negotiate new contracts until after the season ends.
The increase for the Sunday afternoon games on CBS and Fox is less than the the 72% increase that the NFL received under the most recent renewal of the contracts in 1998. However, in the current television market, the increase is considered remarkable. Although ratings for regular-season NFL games declined 10% overall from 1999 through 2003, this decline occurred against much sharper ratings declines for other television programming. And despite that decline, the Super Bowl remains the most-watched TV show of almost any year.
In fact, the two networks are paying more money for a potentially less desirable game inventory. CBS and Fox agreed to let the NFL sell a package or packages of as many as eight games a season for Thursday and Saturday nights and to cherry-pick late-season games to showcase on “Monday Night Football.”
CBS and Fox renewed their deals despite what most analysts describe as enormous losses on current contracts. ABC’s “Monday Night Football” has been estimated to post losses of as much as $250 million a year, and Fox wrote off $397 million from its current $4.4 billion deal in 2002. Viacom executives contend that CBS has not lost money on their deal with the NFL.