NFL TV Partners in Bind Despite Massive Ratings, Record Ad Rates
At the midway point of the 2023-24 NFL season, the league and its media partners couldn’t have asked for a better showing on the TV front, as ratings are at an eight-year high and the going rate for in-game ad units has never been steeper. And yet, in the first year of the NFL’s new $110 billion rights deal—or $125 billion, if you toss YouTube’s Sunday Ticket package into the mix—several network executives believe they’ve been hamstrung by a last-minute scheduling change that has all but crippled a significant feature of the TV ad market.
Before we get to the gripes, here’s the good news: Through Week 8, the average NFL delivery works out to some 17.3 million viewers per game, of whom about 94% are still tuning in via linear TV. That’s the biggest turnout for the league at this stage in the season going back to 2015, when overall TV usage was around 45% higher than it is today. So far, so good.
More from Sportico.com
Advertisers who bought their way into this season’s embarrassment of ratings riches have been rewarded with massive reach across all NFL windows. At the spring upfront bazaar, in which the networks lined up commitments for between 85% and 90% of their in-game units, the average cost of reaching the NFL audience was around 6% higher than it was during the year-ago period. If a mid-single-digit bump doesn’t seem like such a big deal, consider the fact that NFL inventory is already the priciest item on the TV menu; when the average rate for a spot across all available windows is already north of a half-million-dollars a throw, the inflated price can add another $40,000 onto each transacted unit.
The upfront rates were sufficiently elevated to cause the sort of spontaneous hemorrhaging of the nasal capillaries normally associated with mountaineering; according to media buyers, Fox was at the high end of the scale, booking spots in its Sunday national window that fetched around $900,000 per 30-second unit. NBC’s Sunday Night Football fetched upfront rates that were nearly as high ($875,000 per :30), while spots in CBS’ own national window went for around $820,000.
To place those rates in the context of the general primetime TV market, the most-watched, highest-rated program in primetime—60 Minutes—boasts a relatively thrifty unit cost of $120,000 a pop. Now in its 56th season on CBS, the newsweekly draws 8.93 million viewers per broadcast, or nearly three times what the average primetime entertainment show delivers (3.16 million). With a shortage of new scripted fare, broadcasters this fall have seen their average unit cost drop to around $56,000 per ad per show.
The big CBS/Fox/NBC packages account for all of the NFL’s 10 most-watched games of the season thus far, and 17 of the top 20. Crashing the party is ESPN’s broadcast-enhanced Monday Night Football offering, which has been the focus of much of the grumbling during what should be a triumphant season for the league’s TV partners. While MNF units haven’t achieved parity with the spots that air on Sundays, as Disney’s ad sales team commanded nearly $585,000 a pop for the in-game inventory it sold during the upfront, the Sept. 18 decision to add 10 ABC simulcasts to the schedule cast a pall over the NFL scatter market.
By flooding the zone with so much additional broadcast inventory, Disney effectively undermined the value of the remaining in-game units still up for grabs at CBS, Fox and NBC. The 700-800 bonus units that have been tossed into the scatter exchange have wreaked havoc on TV’s supply-and-demand dynamic; the Invisible Hand of the market may as well be flipping off the rest of the NFL TV field.
As much as their sales teams made a killing in the spring selloff, ABC’s rival network execs are miffed they won’t command their usual scatter rate hikes—which effectively neutralizes much of the gains made during the upfront. Whether as a result of sequential ratings declines or a deliberate contraction of spot loads, a reduction in available ad units will almost always result in higher scatter rates. Dump a whole bunch of excess inventory into the system, and the prices will come tumbling down—so much so that the units that had been held back for scatter are now pricing at the same levels as those spots that were auctioned off in the spring.
Scatter inventory is valuable because it isn’t tempered by any performance guarantees. When you’re not on the hook to match any predetermined deliveries, there are no makegoods or audience-deficiency units to eat into your gross sales; thus the networks get to keep every last dollar that rolls in through the sales apparatus. And while those rules still apply even in an oversaturated market, the extra ABC inventory has made it next to impossible for the other NFL broadcasters to use their reserved units to their greatest advantage. It’s harder to sell when the fear of missing out has been eliminated.
ABC’s bonus NFL coverage won’t deprive any network of the funds generated during the upfront, and as the overall revenue figures suggest, nobody’s being trundled off to the poor house. Season-to-date, NFL TV sales are up 8% versus the year-ago period, to some $2.15 billion, thanks in large part to the higher rates negotiated in the spring and a significant uptick in spend across the automotive, entertainment and fast-food categories.
Car manufacturers have spent nearly 30% more on in-game spots than they did at this point last fall, with total spend in the category already at a staggering $267.4 million. Movie studios and streaming services have been spending as if the Hollywood machine hasn’t been silenced by labor stoppages for half the year, with theatrical investment up 41% and the streamers up 66%. Together, the two categories have dumped $205 million into the NFL TV market, good for a $75 million boost versus the analogous period in 2022.
Other key categories, such as insurance and wireless, are up slightly, while a very few major players have reduced their in-game spend. The post-PASPA (Professional and Amateur Sports Protection Act) marketing frenzy has quieted down, as casinos and other facilitators of sport wagering have trimmed their NFL spend by 20% to $70.6 million. Beer is also down, with brewers cutting back by around 12% compared to last fall.
Should Disney and the NFL come to the shared conclusion that MNF’s 13% ratings boost is something to replicate next season, the grumbling over deflated scatter pricing is only going to get louder, and more public. But that’s a question for another day. In the meantime, the national enthusiasm for pro football hasn’t abated; on Wednesday, CBS announced that it had sold the last of its remaining spots in Super Bowl LVIII, for which it commanded as much as $7 million per unit.
Best of Sportico.com
