Monday, November 20, 2006

Countdown to the NFL Network’s Real Kickoff

Thursday evening the grandest media experiment undertaken by a major North American sports league finally will begin to unfold. Launched November 4, 2003, only eight months after all of the league's 32 team owners voted unanimously to approve its formation, the NFL Network finally moves to that next level, where no league managed television network has ever gone before, televising games on its own network, turning away an estimated $300 to $500 million in network revenues for the right to produce and televise eight late season football games.

Three short years ago NFL owners agreed to collectively invest $100 million in the NFL Network, hoping to turn their venture into a great deal more.

Today, in the first of a two-part Insider, SBN looks at the birth of the NFL Network, how and why the NFL decided to place games on a cable sports network owned by a sports league, and where the NFL and cable providers were in terms of distribution at the start of the NFL season. Tuesday’s Insider focuses on where the ‘battle’ what has happened since the start of the NFL season with the two sides.

The league's decision to build the NFL Network with regular-season games comes nine months after it completed deals with NBC Universal Sports on a six-year, $3.6 billion deal to carry Sunday Night games, and with ESPN on an eight-year, $8.8 billion contract to show ''Monday Night Football.'' In November 2004, CBS and Fox extended their Sunday deals for six years, with CBS paying $622 million annually, and Fox paying $712 million. DirecTV extended its contract for $3.5 billion over five years. The National Football League is generating close to $3.75 billion annually in television revenues, an average of $106 million annually for each of the league’s 32 franchises. When you’re generating that much money in television revenues, as a sports league you can take that leap of faith forward.

The NHL Network (available only in Canada) televises a handful of regular season games. Those games however use available broadcast feeds. NBA TV, doesn’t offer games to the American market (games are available via the NBA League Pass). Raptors TV, the NBA’s Canadian version of NBA TV does show NBA games (Raptors, ESPN and TNT games) but again none of the games are produced by the NBA. Major League Baseball remains a sports league without a network.

There are those who will suggest The NFL Network wasn’t created to produce and televise games, however if you recall how the NFL reached this point, it was the inevitable destiny of the NFL Network.

Last fall after the NFL secured network television revenues collectively that are greater then the sum total of NASCAR, NBA. MLB, NHL, the NCAA and the last two Olympic Games combined the NFL understanding that they were dealing from a position of strength, and looked at a number of different options for the eight late season games the league hadn’t sold the rights for.

''I never thought eight games would be so valuable,'' Jerry Jones, the owner of the Dallas Cowboys, said before his team defeated the Eagles, 21-20, in Philadelphia on Monday night last November.

''I get up in the middle of the night to watch international news, and then I turn to the NFL Network,'' Robert K. Kraft, the owner of the New England Patriots told The New York Times. ''I watch it all the time, and many real fans do the same.''

In November there was a great deal of speculation the NFL would either use the eight games as leverage to create a national cable sports network or sell the games to Comcast who would in turn put the games on OLN. OLN, which then reached 65 million homes, secured national cable rights for the National Hockey League.

''We hope our potential programming partner can help us get more exposure, even without putting games on the NFL Network,'' Jones said.

Kraft added, ''If we can have the new multisport platform, and the NFL Network continues to grow, that would be the ideal solution.''

For their part, both Comcast and Turner Broadcasting (TNT) made it clear to The New York Times (at least in November) they were very interested.
''We would love to have the NFL,'' said Jeff Shell, the president of Comcast Programming. ''We're thrilled to still be talking.''

Greg Hughes, a Turner spokesman, said, ''At the right price, we're interested.''

Ten weeks later, on January 27, 2006 the NFL realized they weren’t going to receive what they believed was fair market value for the eight games, and announced the NFL Network would host the games. At least for the short-term (six years) Comcast and Turner weren’t interested in investing hundreds of millions of dollars in helping the NFL move the league’s in-house network forward. The NFL reportedly left $400 million on the table believing it made more sense to leverage those eight games in building the NFL Network’s brand.

The NFL Network was a ‘fledging’ operation at Super Bowl XL, reaching 33 million homes. For a league that has established record ratings for the first tens weeks of Monday Night Football on ESPN (in excess of nine million viewers each week), ESPN’s 95 million homes offer the NFL the cable partner it needs to deliver ratings that can justify billions of dollars. The NFL Network didn’t have the reach or the awareness to deliver significant ratings to the NFL when the league decided to make what at best was an ‘interesting’ decision.

''They'll be able to build the NFL Network into something far more significant,'' said Marc Ganis, a sports industry consultant in a New York Times report last January. ''On the 357 days when games are not being carried, N.F.L. programming will be going into people's homes.”

As Thursday approaches the biggest challenge the NFL Network faces remains the networks reach, or in this case, the lack thereof. Currently the NFL Network only 36 months old is currently available in 41 million American homes. Using their eight game late season schedule as leverage the NFL Network hoped to be in 25 million more homes by Thanksgiving Day November 23, 2006 when the Denver Broncos will travel to Kansas City to meet the Chiefs in an 8 PM game. The NFL Network began a $100 million advertising campaign in late July that will focus on the major cable operators that have yet to hear the call of the NFL Network.

To date, that campaign has only created more anger between key cable operators and the NFL Network. The bottom line, unless there is a stunning reversal in the next 72 hours, the NFL Network will be in a little more than the 41 million homes they reached before the multi-media campaign began. By comparison, ESPN and ESPN2 are in close to 100 million homes, and Versus the NHL’s cable partner is in 71 million homes.

“People will go nuts on Thanksgiving when there's a game on and they can't watch it,” Seth Palansky of the NFL Network told the USA Today this summer.

“We think it's asinine that Time Warner (the nation's No. 2 cable provider) carries 12 shopping channels and 50 other channels you don't want — but can't find room for one dedicated to the most popular sport in this country,” Palansky told the USA Today. “We're replacing the kid gloves with bare knuckles.”

The NFL has been very proactive in getting their message to football fans. According to a report in Friday’s USA Today one ad aimed at Time Warner said, “Don't let Time Warner ruin your football season. You'll miss NFL games if you don't call and demand NFL Network now.” Another targeting Cablevision, a provider in metro New York, warned, “Don't let Cablevision shut you out.” The ads listed the channel's games and a toll-free number for NFL Network.

Time Warner (who Palansky called ‘asinine’) sent their own not so subtle message to the NFL Network. The cable operators spun why they weren’t prepared to go dancing with the NFL Network.

A July report in The Buffalo News suggested when Adelphia subscribers are switched to Time Warner Tuesday. Buffalo, Dallas and Cleveland are three NFL markets currently enjoying the NFL Network that will be on the outside looking in Tuesday.

"We pleaded to be left on while we continue to negotiate," e-mailed the spokesman, "especially since the first of 52 preseason games and 12 inside training camp shows begin, but Time Warner refused."

Tuesday in Part II of SBN’s Countdown to the NFL Network’s real kickoff, a look at the ongoing battle between cable operators, the National Football League and the Pandora’s Box the two sides may have opened.

For Sports Business News this is Howard Bloom

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