NFL Media Partners Won’t Imperil TV Model With a Mad Dash to OTT

Anthony Crupi
·7 min read

A day after Amazon claimed dominion over the NFL’s Thursday Night Football window—which effectively makes the package the first to jump headlong into the direct-to-consumer space—Wall Street analysts have been eager to hang a garland on the $1.52 trillion online retailer. But as the league itself has made it known, it would be foolhardy to overlook what the legacy TV networks managed to secure with their pricey renewals.

Speaking to the press just hours after Disney took the wraps off its new NFL rights deal, which extends through 2032 and includes such enhancements as a return to the Super Bowl rotation for ABC and a flexible schedule option that’s been baked into ESPN’s Monday Night Football showcase, Hans Schroeder, executive VP and COO, NFL Media, made certain that the league’s big commitment to TV wasn’t lost in the streaming shuffle.

“While digital is growing, the traditional TV ecosystem is still incredibly rich, incredibly deep, incredibly broad,” Schroeder said. “You know, we reach over 200 million people a year through television.… And what I think partners like ESPN and Disney do so well is to continue that wide reach, which has always been really important to us, while also looking for ways to add to and augment that.”

Schroeder went on to say that TV and streaming platforms are not mutually exclusive delivery systems, nor is the latter necessarily in a parasitic relationship with the former. “We’re certainly excited about the opportunity that Disney’s going to have to grow new platforms with our content, but the existing, traditional ones are still really big, even if they’re not growing like they once were,” Schroeder said. “There’s still a ton of fans that we know look [to TV] first to get our content.”

ESPN’s Monday Night Football slate in 2020 averaged 11.8 million linear TV viewers over the course of 17 telecasts, a tally that came up just shy (-2%) of the previous season’s 12.1 million. Per Nielsen, those deliveries topped every non-NFL broadcast during the 2020-21 TV season. Perhaps more important, the package averaged a 3.5 rating in the dollar demo, which works out to some 4.53 million adults 18-49, making it TV’s third-biggest draw behind only NBC’s Sunday Night Football and the Fox/NFL Network simulcast of Thursday Night Football.

As Schroeder reiterated, growing the ESPN+ base needn’t undermine Disney’s traditional TV brands. “We look at it very much as, How do we add distribution in a way that’s complementary, [and] reach fans through new screens?” Schroeder said, before adding, “You’ll still see ESPN—and now ABC—be very much the core” of the NFL’s Disney presence.

Including a bridge-year extension of its current agreement and the new 10-year renewal, Disney will pay the NFL on the order of $26 billion between now and 2033. While the media giant still pays more than any other NFL partner for its rights package, the step-up (approximately 30%, or $700 million more per year) is not nearly as steep as the 80% hike the legacy broadcast outlets signed off on.

In return, Disney is seeing a whole lot of upside, including: the rights to two Super Bowls on ABC, a new divisional playoff game, flex scheduling for Monday Night Football and a grand total of 23 live games per season, up 35% from the current roster of 17. Or as MoffettNathanson analyst Michael Nathanson noted Friday, “Disney appears to be the only company that can claim that they were able to get more value from the new deal than the old deal.”

For all the talk about using the NFL as a means to bolster adoption of ESPN+, Nathanson said he believes that Disney will be cautious about exercising its newfound rights to stream its ESPN and ABC telecasts on the over-the-top service, at least in the early going. A more linear approach in the near term will serve to “protect the traditional pay-TV ecosystem as long as possible … by [maintaining] the economic value of ESPN’s linear affiliate fees,” Nathanson said.

ESPN generates some $8.89 billion by way of its carriage deals with cable, satellite and telco-TV operators, so it is obviously in the network’s best interests to shore up that revenue stream. But if cord-cutting continues to accelerate, the number of subscribers against which ESPN can charge its monthly fee of $9 a head may shrink from 83.5 million customers today to 71.4 million just four years from now. (The latter estimate includes nearly 20 million virtual MVPD subs, leaving the traditional wireline TV services down to just 51.9 million homes.)

If the network partners may not be in any rush to migrate NFL games to their homegrown streaming platforms—as ESPN must shore up its affiliate fees, so are CBS, Fox and NBC unwilling to imperil their own retransmission-consent and reverse-comp revenues—the scope of the new deals allows for a gradual shift toward an unknowable future.

“I would say that the NFL is really the number one driver on retrans and reverse comp and cable sub fees,” said CBS Sports chairman Sean McManus. “In many ways, it’s helping to hold together the traditional TV bundle.” At the same time, the gradual shift to other screens should serve to reach younger fans who aren’t in thrall to the tube. It is, as McManus avers, a balancing act.

As costly as the deals shall prove to be, the NFL’s media partners shouldn’t have to waste a lot of time trying to justify the renewals to any but the most atavistic of investors. A month ago, Disney CEO Bob Chapek made waves when he told analysts that the company would only invest in sports properties that turn a profit. “Our approach is really simple,” Chapek said. “If it’s accretive to shareholder value, we’ll do it. If it’s not accretive to shareholder value, we won’t do it.”

So besides all the obvious value the NFL brings to the table—20% of the time spent on ESPN’s linear TV network, some $228 million in regular-season ad revenue, an arsenal of DVR-proof content—how does Bristol rate the league as a long-term investment?

“We have a history of being strategic and disciplined when acquiring rights, and that philosophy has not, and will not, change,” said Jimmy Pitaro, chairman, ESPN and sports content. “When you look at what we’ve acquired here, in terms of the game inventory, regular season, postseason, flex scheduling and quality of schedule—this is no exception. We now have more value than we’ve ever had before.… This deal is a win-win-win: It’s a win for us, it’s a win for the league, and most importantly, it’s a win for our fans.”

While the games are the most visible element of the Disney-NFL partnership, Pitaro took care to emphasize the singular importance of ESPN’s ancillary rights, saying that the exclusive video highlights are the lifeblood of studio shows like SportsCenter.

“We really look at this deal in two ways: First from a live-game perspective, and second from a highlights-and-footage perspective,” Pitaro went on to say. “Obviously, live game rights are the jewel, or the centerpiece of this deal. But you can’t ignore the fact that the highlight rights that we have are incredibly valuable to ESPN and the Walt Disney Company, from a studio perspective as well as the ESPN+ side.”

Burke Magnus, ESPN’s executive VP, programming and original content, echoed Pitaro. “It’s essentially oxygen for ESPN, on a 365-day basis, to cover the league and their stories and to promote the game,” Magnus said. “And then we pay it off with a nice games package.”

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