Monday, November 12, 2007

Just what the Lords of the Pigskin ordered for the NFL Network – a marquee game

In their latest financial valuation for NFL franchises, Forbes Magazine believes the average NFL franchise is worth an estimated $957 million. The list of NFL owners includes titans of industry – some of the most powerful and influential leaders in the sports industry: Jerry Jones, Robert Kraft, Dan Snyder, Paul Allen, William Clay Ford, Pat Bowlen and Wayne Huzienga are but a sample of NFL owners who not only lead on the football field, but are captains of industry away from the gridiron. For all the success these men have enjoyed in their professional endeavors, it’s remarkable to consider, try as they may, the Lords of the Pigskin have struggled at moving forward with the NFL Network. However, fate may indeed be about to deliver exactly what the Lords of the Pigskin so desperately need, a must see late NFL regular season game on the NFL Network.

As was the case during the last six weeks of the 2006 regular season, the NFL Network will offer eight regular season games, starting with a Thanksgiving Day game that will feature the defending Super Bowl champion Indianapolis Colts traveling to Atlanta to meet the Michael Vick-less Falcons. But the best of the eight regular season games the NFL Network offers this year ends with a week 17 game, the currently unbeaten New England Patriots heading to the Meadowlands to meet the New York Giants.

While the Dallas Cowboys easily handled the Giants 31-20 at Giants Stadium yesterday, the two teams were tied 17-17 at halftime. There remains plenty of football games to be played between now and week 17 (next Sunday night’s game on NBC featuring the Patriots heading to Buffalo to meet the 5-4 Bills could produce a surprise) but there is a strong possibility the Patriots will be 15-0 when they had back to the scene of the crime (spygate) on December 29 for an 8:30 kickoff on the last Saturday night of 2007. Should the Patriots be undefeated that night, the game will represent must-see TV; the long awaited perfect storm NFL owners need to prove (at least in their minds) how important the NFL Network is to football fans.

Giants and Patriots fans other than those in the region that are designated as the home television market for both teams (generally a 75 mile radius), will need to have access to the NFL Network to see what could be one of the remaining pivotal games in the Patriots’ quest to join the 1972 Miami Dolphins – as the second NFL team to go through an entire NFL season and win a Super Bowl while going undefeated.

When the NFL began offering games on the NFL Network last year, the league did agree to guarantee that any team who had one of their games designated for broadcast on the NFL Network would have that game televised by an over-the-air carrier (non cable). The same rule exists when ESPN televises an NFL game. It’s important to note the NFL Network is in only 35 million homes, while ESPN is in more than 100 million homes.

Depending who’s telling the story, a year ago when the NFL Network televised their first regular season game, the league had 41 million subscribers. By years end the league suggested that total had reached 44 million. Somehow today that total has shrunk to 35 million.

Regardless of what the actual number is, it isn’t anywhere were the NFL believed it would be by this time. The NFL Network expected to be in more than 70 million homes by now.

The NFL has been very proactive in taking their case to football fans, the problem is it hasn’t had any impact on the major cable carriers, Time Warner, Comcast, Cablevision to name but a few who haven’t shown any interest in paying the NFL the estimated 80 cents per subscriber the NFL wants from any cable carrier interested in offering the NFL Network on a full time basis as part of their basic cable package (the package that includes ESPN, TNT, USA Network and other cable networks)

The marketing/sales strategy the NFL used a year ago to drive cable carriers into adding the NFL Network was both costly and a complete disaster.

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 traveled to Kansas City to meet the Chiefs in an 8 PM game, the first live broadcast of an NFL regular season game on the NFL Network. The NFL Network created a $100 million advertising campaign that focused on the major cable operators that have yet to hear the call of the NFL Network (and 15 months later have still yet to hear that call).

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

“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.”

According to a report in USA Today on July 28, 2006 one ad aimed at Time Warner says, “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, warns, “Don't let Cablevision shut you out.” The ad listed the channel's games and a toll-free number for NFL Network. The multi-faceted ad campaign is expected to start early next week.

Time Warner (who Palansky called ‘asinine’) sent its own not so subtle message to the NFL Network. A report in the July 28, 2006 edition of The Buffalo News suggested when Adelphia subscribers switched to Time Warner on August 1, 2006 Buffalo, Dallas and Cleveland three NFL markets currently enjoying the NFL Network up to and including that day will be on the outside looking in. That remains the case today.

"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."

Most cable industry insiders believed 15 months ago, regular season games would drive consumers to call their local cable operators if that cable operator currently wasn’t offering the NFL Network. That never materialized

Cable TV expert Jimmy Schaeffler, a senior analyst with the Carmel Group consultancy told the USA Today back then, “They don't have leverage with individual operators, but they have leverage where it counts the most: with consumers. Who else gets in so many homes in less than three years? They're a one-of-kind entity.”

Kris Magel, senior vice president-account director at Zenith Media, told Media Post in May 2006 live NFL games would help in negotiations with MSOs. "I don't think that's going to drive them to 70 million homes in a year," he said. "But it gives them leverage since cable operators want their platform to increase their local advertising base."

Given that none of that ever happened, the NFL is using a different strategy this year, taking their message to the FCC and other politically like-minded groups. According to American Business First, as part of a new political lobbying effort, the NFL network wants the Federal Communications Commission to let a third-party arbitrator solve the four-year carriage disputes by determining if and how operators should carry the channel.

Network executives are hoping for a ruling as early as next month.

"We're just trying to get the dialogue started so people will look at it," said NFL Network COO Kim Williams. "It is truly almost impossible (to get carriage) if you don't have the leverage of vertical integration (that Comcast and Time Warner have), which clearly we don't."

The cable industry made it clear to the American Business First they aren’t very impressed with the latest tactic the Lords of the Pigskin are taking in trying to force the NFL Network on cable carriers.

"We don't believe the FCC has the authority to delegate responsibility to adjudicate program carriage disputes to an arbitrator," said David Cohen, Comcast executive vice president.

"Even if the FCC were to give them, we would challenge that in court and we would fully expect that a court would agree with us that the FCC was exceeding its authority."

However, the NFL Network, in its October 12 2007 comment, stated that, "The Commission's rules, adopted at the direction of Congress, aim to protect competition and diversity in the video programming marketplace."

"It's ironic that the NFL is pursuing this when they exclusively sell Sunday Ticket to DirecTV," said Melinda Witmer, Time Warner Cable's senior vice president and chief programming officer. "The claim that they need assistance from government for fair treatment is ironic."

Thursday Dallas Cowboys owner Jerry Jones continued to take the NFL’s case to the media.

“It is important to our short- and long-term range that these cable companies understand that our ownership is totally aligned and completely committed with foregoing rights that we could have gotten, which is investment within itself. We've made investment, we're making money, but relative to just doing our traditional right, we're not doing that.

”And the reason that we are is because the network has become about football 24 hours a day, 7 days a week. Our games will attract other football programming. And we know and our guess is there's a huge interest in their subscribers in their basic digital package. “There's big interest in having that in their package.

“Firsthand, in Texas, were Time Warner is, I know that the -- we have the same percentage of Cowboy fans in San Antonio that we have in Dallas, Texas: 97 percent. The same thing is true in Austin and other places in Texas. Time Warner knows that. And they know, and they're losing subscribers, and they're gonna gain new subscribers, and they know if they had that content in their basic package; they're electing to still try to go with the -- with a special tiering.

“So that it is really incumbent upon me and my in the Cowboys and us as a part of the NFL, if we want to build on that, it's important that our subscribers in Texas cancel Time Warner. They need to cancel it. And they need to go other options, which are the satellite option or they can go to the telecoms option or those types”

Well not a completely new concept – Jones suggesting it’s time for those who are forced to endure life without the NFL Network to get tough and give up the 500 channel cable universe. That isn’t going to happen… nice try Jerry, but he did suggest it’s time for those elected officials to stop governing the country, and start taking care of the NFL Network.

“They can go to their representation on an interstate basis or a national basis. And they can say, Look, you've given these people license exclusive in my area, we're, in my case, Dallas Cowboy fans and we can't get it. We don't have the recourse, let's do something about that. We all understand that pressure. That is happening.

“We visited with the Time Warners and Comcasts about that and they say, We don't hear it, we don't hear that complaint. We don't think people are worried about it to the extent that you would like for us to be worried about it. We know that not to be a case.

“And so, for instance, what I'm doing, and doing it in the spirit of -- I've got a little reputation of always a little maverick dealer, Cowboys in the league, but, boy, this is one that's in such best interest of the NFL, of our fans, that I'm busy out here talking to various markets and asking them to cancel out of Comcast, cancel out of Time Warner and go with the other people.

“And I think it's going to be real effective. I know that I have large consistencies of state senators, representatives that will hear in a big way when Romo lines up against Favre against the Green Bay Packers and that game's not gonna -- there's no way it's gonna be showed on Time Warner. There's no way that there's time for any negotiations to make a different statement. Time Warner might say, Oh, well, we might have it on there, because they want to lessen the pressure so people won't switch over during this time. We're fixing to play the Green Bay Packers, could go right to the game, and then play the Carolina Panthers, in an area where you've got a huge percentage of people that really won't be able to see the game.”

How much sense does that make? The price of a barrel of oil is hitting record heights, the American dollar is collapsing, thousands of Americans are losing their homes, the War in Iraq continues, but the Lords of the Pigskin want elected representatives to focus on the NFL Network.

It appears both sides (the NFL and cable carriers) are entrenched in their position, unable or unwilling to consider a compromise as Jones pointed out.

“I think it's pretty apparent to me when you see 240 companies that operate off of some pretty basic fundamentals, you have some size factors, but we know what works, we know what the Golf Channel leadership is compared to what these NFL (indiscernible). I think it's very apparent that the bigger cable companies, the Time Warners, the Comcasts, the Cablevisions, they just don't want to get in the business of having.”
They don't want to.

“In the face of it costing the subscribers and not having (indiscernible), so they're deciding not to do it, it's an old way. There is a way we can do it, and that's if we can get basis.

“So that in answer to your question, at this time they haven't had the -- they haven't been offered a deal they can't refuse, so to speak. And it's imperative that we get the feedback and they get the feedback and people cancel subscriptions as well as not adding to their subscriptions, competition coming in and get subscribers from them. And so until we have an understanding that's what the result of not having the NFL Network, then I don't think there's going to be any negotiation.”

Jones for his part doesn’t believe it’s a price point issue (what the cable operators have suggested from day one.)

“The most sensitive thing is an overall plan that they want to build an asset, not tiering it, and not have it on because they could say, Well, if our subscribers were used to it, then we would have to continue to be a player until they have a mind-set of literally being programmers to some degree, rather than companies that basically are looking for the cheapest product that they can get out there and use their assets for cash cows.

“Again, I know that's (indiscernible) but the bottom line is we all know it's cheaper to put a talking-heads show on or it's cheaper to put something. But where in the world do you start to think about, well, what is it that all these people that we've got a captive market to, what would they like to see? What would they really like to see? Do you really think they'd like to see these NFL games?

“And they're saying, Well, we want them to pay for them. And it's just a clever way of trying, as I've said about four times here, to build the asset. We know they have room in the business model to do what they want to do without financially.”

A better question – by trying to use the political arena to solve their issues, is the NFL opening up a Pandora’s Box when it comes to legislatures, considering the other areas the NFL would just as soon leave unregulated?

“I think that certainly anyone in any industry -- before I came to the NFL I was and real estate business. Most major industries, as you know, have some sensitivity at some place, either at the state level or another level.

“Yet, when you have to make a decision as to how to approach that and look at the overall what you think you have with your legislative privileges and what you think in this particular case. And what we're asking for here and what we're asking from you is not a conflict with what we think are privileges are about in the NFL and what we're about as a league. It's not divergent from that.

”And so it allows us and we feel so strongly that this is an overreach by the cable companies or an abuse of their subscribers that we can go there and present and have privileges too that at the end of the day you're trying to get as much coverage as you can.

"We certainly, as you may or may not know -- we have huge numbers of our games shown through television, certainly we're shown in 32 markets and countries which have huge populations fans get to see.”

If the Lords of the Pigskin are expecting those elected to political office to stop governing the nation to help manage who’s receiving the NFL Network, they had better rethink that strategy. However, if those who manage the NFL notice one of the biggest sports stories of the year is heading towards the NFL Network, that might begin the process the NFL needs to attract cable carriers, but unless and until the NFL Network either offers more games or a better schedule, it will be next to impossible for the NFL Network to grow.

For Sports Business News this is Howard Bloom

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