Friday, November 23, 2007

NFL games on the NFL Network – Season 2 debut

In the 1997 movie The Assignment, Adrian Quinn plays the role of an American naval officer who is recruited for an operation to eliminate his look-alike, the infamous terrorist Carlos The Jackal. In order to make Quinn feel like Carlos, his handlers force him to eat nothing but plain oatmeal for days on end. Not oatmeal with brown sugar, not oatmeal with cinnamon, not oatmeal with raisons, strawberries or any flavor you might add to make the blandest food ever created to taste better, but just oatmeal. After two weeks of eating nothing but oatmeal Quinn explodes in a fit of rage, he’s had enough. Being forced to eat bland, tasteless oatmeal for days on end might drive someone to the edge of the abyss – similar to watching a National Football League game broadcast with Bryant Gumbel handling the play-by-play.

Thursday evening Gumbel, one of America’s pre-eminent sports broadcast journalists kicked off the NFL Network’s second season of regular season NFL broadcasts. Teamed with one of the better NFL broadcast analysts Chris Collinsworth, try as he may, listening to Bryant Gumbel do the play-by-play for an NFL game is worse that watching paint dry on a cold winter day.

As the host of Real Sports with Bryant Gumbel, Gumbel’s forte is his tremendous insight into how the sports industry works. As was the case last year when Gumbel and Collinsworth teamed together to broadcast the NFL Network’s series of games, hearing someone scratching on a blackboard (that nightmare sound) is more appealing than listening to Gumbel’s play-by-play.

Collinsworth on the other hand, was solid and insightful as ever. Collinsworth managed to navigate the transition from football player to football broadcaster seamlessly. One of the features the NFL Network has added to their coverage this year are “snapshots”, pictures from that games broadcasts. That was about as effective and exciting as Gumbel’s play-by-play. The NFL Network has enough distribution issues, what it doesn’t need is the “voice of the NFL Network” causing viewers to wish the that it returned to NBC’s infamous silent broadcast on December 20, 1980.

On that Saturday, if you tuned into NBC between 1 P.M. and 4:30 P.M., you witnessed something extraordinary: an end-of-season football game between the New York Jets and Miami Dolphins with no one describing it to you. There was, in fact, no intelligible talking at all, just crowd noise, the stadium public-address system and whatever grunts and pad smashing the field-side microphones could pick up - some three and one half hours of announcerless air, the one and only protracted blank in history's ongoing, chatter-filled recording of broadcast sports. That would be more exciting to listen to than Bryant Gumbel handling the play-by-play for an NFL game.

Distribution remains the biggest issue the NFL Network continues to face -- the Lords of the Pigskin and the Czars of America’s Cable TV Universe. The War of the NFL Network and the Cable Operators continued unabated in the days leading up to Thursday night’s broadcast. As was the case 12 months ago when the NFL Network broadcast their first eight live NFL games on the league owned network, the biggest issue the NFL Network faces is the lack of distribution in America’s cable universe. In a 500 channel universe the NFL Network is in has many homes (the 35 million range) as sports “titans” the Golf Network, Speed, and ESPN Classic. The NFL as Commissioner Roger Goodell made it clear earlier this week, is fed up and won’t take it anymore when it comes to dealing with America’s cable carriers.

“We are working as hard as we can to get the NFL Network and all other cable systems on terms that don't involve charging our fans extra. None of the current distributors of NFL Network have raised their rates due to adding our channel to their system. Right now some big cable operators want to make the NFL Network a pay extra or Pay-Per-View option. That is not good for our fans or fair to our fans, and we are not agreeing to that as such.

“The problem we face is that those big cable operators treat independent programmers differently than the channels they own. It's not a level playing field. We are fighting to be treated like their own channels. That's what's best for our fans and what we want our fans to understand. We want these upcoming games starting Thursday night and everything else on the NFL Network, including our two college bowl games, available to all fans on terms that will be good for all involved, including the cable operators that are currently holding out.”

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).

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.

Earlier this week Comcast having had enough of the NFL’s tactics, delivered a cease and desist letter to the NFL demanding that the Lords of the Pigskin end their campaign of aggression against cable operators, or in simpler terms stop telling people to switch to the satellite operators (both DirecTV and the Dish Network) offer the NFL Network.

"Comcast offers the NFL Network to all of its interested customers today and they can watch every NFL game the league makes available on cable television. The fact is that the vast majority of our customers have elected not to receive NFL Network. Under our agreement with the NFL, which the league negotiated and signed, we offer the NFL Network as part of our Sports Entertainment Package. This is the best and fairest way to provide the NFL's expensive programming to customers, because viewers who want to watch the channel will be able to see it, while others who prefer not to receive it will not be forced to pay.

“While the NFL claims that it wants its games to be seen by the widest possible audiences, it's actually their rules that limit which games fans can watch. It's the NFL that designates which cities can have over-the-air broadcasts of specific games. It is also the NFL that decided to take these eight games off of free broadcast television and to try to enrich themselves at the expense of their fans by creating a multi-billion dollar asset called the NFL Network.", said David L. Cohen, Executive Vice President, Comcast Corporation.

It really remains a matter of dollars and cents, and it makes not lack much sense (pardon the bad puns). All one needed to do was compare the value (and fees) associated with what ESPN offers cable careers to what the NFL Network continues to demand.

The NFL Network continues to demand around 70 cents per month from cable companies for each home that carries the NFL Network, while ESPN charges cable carriers around $3 per month.

ESPN offers Monday Night Football, thousands of Major League Baseball, National Basketball Association, and NCAA football and basketball games – all for $3 per month. The NFL Network can say whatever they’d like (and yours truly happily purchases the NFL Network as part of Rogers (Canada) Cable’s digital sports package) but at the end of the day beyond the eight games, the NFL Network is no more than niche programming. At 70 cents a month, compared to the value ESPN offers sports fans the difference is astounding.

Goodell doesn’t believe it’s a matter of dollars and cents – Goodell doesn’t believe 70 cents a month is a stumbling block.

“First of all, let me remind you that we have a deal with Comcast. This was carried on Comcast last year and they paid that rate and they didn't pass it onto their consumers, at least directly. And when they took it off earlier this year against our wishes, I don't recall and I don't believe that they gave a refund to those customers. In fact, they just put through a price increase in the last several weeks that was significant; it was over $50 or $60 a year.

“I don't think we feel we're painted in any corner at all. I think what we're trying to do is get fair value for what we think is a tremendous channel 365 days a year. It's not just about eight games. We think the programming on a yearly basis is extraordinarily popular, and we do very well with it and our fans want to see it. We obviously want to make sure we get fair value for it, and we will negotiate for that. But we are willing to negotiate and we are willing to be flexible because we think it's important to our fans to get to the broadest possible audience.”

But as far as the NFL is concerned, none of that matters. Goodell believes the NFL continues to offer the cable carriers a viable, affordable product that deserves wider distribution.

“First off, the question on expanded basic -- we had backed off of that earlier this year, back in January, I believe. We're looking for digital basic distribution. We've heard the issue of sports tier. You're all familiar with it. We don't believe that the cable operators are committed to a viable sports tier product. We're not seeing it.

“What's on the sports tier besides the NFL product? On the sports tiers we're just not seeing the kind of distribution that they have indicated there would be for this. They put all of their own sports channels on expanded basic or digital basic. They have put other sports, including Major League Baseball, on digital basic. So we're not seeing that they're committed to a real sports tier.

“We believe that they're just putting us on the sports tier either to charge their fans more money or our fans more money by wanting to create a new tier that can generate new revenues, and we don't think that's right for our fans.

“As one example, Comcast last year had us on a digital tier where we were in roughly 8 million homes, which I think will be closer to the million this year. They took us off and against our best wishes to put us on a sports tier that's less than a million, and that was very troubling to us. And now to get that back as a fan you are required to pay at least $5, probably closer to $8 on a monthly basis, to get the NFL Network, and we think that's wrong for our fans. We don't see that commitment to sports tiers on behalf of the cable operators that would be viable for us to get the broadest possible audience, which is what our objective is.”

One of the major battles continues to be fought over the rights to broadcast NFL Sunday Ticket, the leagues out of market broadcast package. In the most recent NFL broadcast agreements that began in 2006, DirecTV pays $700 million annually to carry NFL games. That's comparable to the $712.5 million that Fox pays annually, and more than CBS' $622.5 million annual fee, in order for each network to put games on free TV. DirecTV has the right to offer all of the Sunday afternoon NFL games. The NFL’s two other major broadcast agreements, NBC’s Sunday night $600 million annual package and ESPN’s $1.1 billion Monday Night series do not involve DirecTV’s Sunday ticket since those games are broadcast nationally as single broadcast.

According to a September 2007 CNNmoney report, if DirecTV winds up with as many as 3 million subscribers for NFL Sunday Ticket, that could wind up yielding more than $800 million in revenue. DirecTV charges subscribers $249 for the rights to Sunday Ticket.

According to CNNmoney’s Paul R. La Monica Qaisar Hasan, an analyst with Buckingham Research estimated that DirecTV had about 2 million subscribers for its NFL Sunday Ticket product in 2006 and that total sales from the offering came in at about $550 million. To put that in perspective, DirecTV finished last year with about 16 million subscribers and $13.7 billion in revenues.

And Haisan told CNNmoney that NFL Sunday Ticket he believes is a healthy, growing business for DirecTV. He estimated that the company generated $380 million in sales from its NFL package in 2004 and $430 million in sales in 2005. And this year, he is predicting a 13 percent increase in sales from 2006, to $620 million.

Each NFL teams receives approximately $106 million each year from the NFL broadcast agreements that collectively generate $3.75 billion for the league’s 32 franchises. DirecTV’s $700 million contribution is an important piece of the puzzle. And as the numbers suggest it’s a win for the NFL (the $700 million) and a win for DirecTV (just look at the numbers in this Insider Report). The cable carriers might be much more amenable to carrying the NFL Network on their basic tier if they had a bite of the NFL Sunday Ticket apple, but according to Goodell that isn’t about to happen anytime in the near future.

“They've expressed interest in the Sunday Ticket package, and we are aware of that. We've had discussions with them. We've had negotiations with them, and we haven't been able to reach a conclusion that makes sense for either party. So do I think that they continue to have an interest in that? I'd say yes on one level, but on another level they tell us that all of the football fans that actually want Sunday Ticket have already got a satellite, and we don't accept that either. So I'm not sure they express interest in having it but on the other hand they say there are not a lot of customers that still want it out there, and we don't agree with that.

“Our big focus that you should be aware of is we want to make sure we maintain a quality free television product. We need to have all our games on free television in the home market, and free television is very important to us as we continue to grow our game and bring more football to more fans.”

Keeping on message – Goodell continues to paint the NFL as the defender of the American consumer against the big bad cable operators, denying sports fans their right to watch the eight (seven left after last nights game) games on the NFL Network.

“You're aware of the fact that the FCC is focusing on the position of cable in today's media world. Is it becoming too dominant? That's something they're looking at on a broad level. Many of the issues don't affect us. There is an FCC mechanism that's been used before in the case of regional sports networks, and we think that it potentially could be helpful to us in our situation as well as some other independent programmers like Hallmark that are trying to get distribution at a reasonable rate, and we have engaged with them and we would be willing to do that.

“We think that that type of a structure and the history shows that there's usually a settlement of the issues rather than actually going through that process because both sides reevaluate their position and come to an agreement. So we would welcome that. We are looking for any process that would help us reach a resolution as quickly as possible on terms that both sides can be comfortable with.”

Try as they may, what the NFL Network really needs are marquee match-ups. Next Thursday night the Lords of the Pigskin will have that opportunity. Next Thursday night on November 29th, the Green Bay Packers will travel to Dallas to meet the Cowboys. With both teams winning yesterday the two top teams in the NFC both with 10-1 records will face each other in a potential NFC Championship game preview. The game has tremendous playoff, home field and Super Bowl XLII implications. Similar to the last live NFL game the NFL Network will broadcast a month later on December 29 (New England at the New York Giants) in a game that will have NFL fans salivating.

NFL fans couldn’t care less about the War of the NFL Network and the Cable Operators, all they’re going to care about next Thursday night is watching the two 10-1 NFL teams, two marquee sports franchises, two of the biggest brand names in the sports industry facing each other in a must-see TV game.

For Sports Business News this is Howard Bloom. Sources cited and used in this Insider Report: The New York Times, USA Today and CNNmoney

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