Can traditional media companies afford to pay more for the NFL with the continued pressures on linear television? Or will the NFL instead allocate more games to digital players — who can afford to pay bigger checks — at the expense of its traditional partners?
These vitally important questions of high importance to broadcast TV station ownership groups were tackled in a new investor report by MoffettNathanson Senior Analyst Rob Fishman.
He notes that media investors have been grappling with these questions and the implications for sports’ traditional media partners for at least the past decade.
“Several years before contractual opt-outs in its current distribution deals, the NFL is coming back into the market ahead of next season looking to extract even more from the media ecosystem,” Fishman notes.
The first domino expected to fall, in his view, is CBS. Fishman points to its change-of-control clause. Now that Skydance controls Paramount and, thus, CBS, MoffettNathanson expects the NFL to then turn its attention to the remaining media rights deals where existing media partners are set to trade higher costs for longer-term certainty. Further, Fishman and his team anticipate incremental bidders (namely Netflix and YouTube) to be brought into the fold for new carved out packages.
“After reworking its core set of packages, we foresee a total Average Annual Value increase to $15.9 billion, or 58% higher than the current agreements,” Fishman concludes, adding that he expects CBS to pay the highest percentage increase of the league’s traditional media partners at 50%. That’s followed by FOX and NBCUniversal securing slightly lower inflation at 40%.
“As was the case in the last round of renewals, we expect ESPN to pay the lowest percentage increase at 30%,” Fishman adds. “Finally, we expect Amazon to pay the largest percentage increase (100%) to retain Thursday Night Football with the average viewership of the package now approaching MNF on ESPN levels.”
Fishman concludes, “in the past, owning and retaining NFL inventory has enabled traditional media companies to drive higher revenues as the importance of the content within the Pay TV ecosystem grew. We expect higher NFL ad dollars to continue while the affiliate revenue lever is likely to be harder to pull for companies protecting long-tail cable networks, especially as skinnier bundles continue to gain traction. However, we expect media companies will be forced to offset higher NFL costs through a reallocation of content budgets mitigating the EBITDA impact.”
