Friday, November 12, 2010

The National Football League – the ratings giant

Currently, three American terrestrial (over the air) television networks CBS ($3.73B), NBC ($3.6B) and Fox ($4.27B), as well as cable television's ESPN ($8.8B) are paying a combined total of $24.4 billion to broadcast NFL games through the 2011 season for CBS, Fox, and NBC and through 2013 for ESPN. The current NFL agreement with DirecTV ($4B) through the 2014 season – tells the story of how the NFL’s economic engine, its television. That doesn’t include the “value” the games the NFL Network televises, but the bottom line the NFL’s economic engine is in large put fuelled by the rights fees the network generates.

At the halfway mark of the 2010 NFL season – statistically speaking, the NFL continues to generate the ratings the league’s biggest financial partners expected for their multi-billion dollar investment.

More fans are watching NFL games on television through the season’s first nine weeks than ever before, according to information provided by The Nielsen Company.

More than 175 million fans have tuned in to at least part of an NFL game this season – topping the 170 million viewers at this point last year. The average NFL game telecast (including broadcast and cable) has drawn 18.3 million viewers – double the average primetime viewership (8.6 million) for the big four broadcast networks in the new television season.

Consider some of these remarkable “highlights”:

• NFL games account for the 14 most-watched programs on television since the NFL season kicked off on Sept. 9. This compares to NFL games accounting for the six most-watched shows at this point last season and none of the top 15 shows five years ago.
• NFL games are averaging 18.3 million viewers – up seven percent from last year at this point (17.2 million).
• NFL games account for the 30 most-watched programs on television (since Sept. 9) among adults aged 18-49 – with each of the networks televising NFL games represented on that list.
• An NFL game telecast has been television’s most-watched program in each of the nine weeks of the NFL season.
• NFL games top the local ratings in NFL markets 86 percent of the time – the highest rate in history after nine weeks.
• 10 NFL clubs have posted local-market ratings increases of at least 20 percent compared to last year at this time.

Through nine weeks of the 2010 season, THE NFL ON CBS is averaging 18.587 million viewers (Persons 2+), a 16% increase over 2009’s 15.963 million viewers. This year’s 18.587 million viewers is the highest number of average viewers for the first nine weeks of the season for the AFC television package in 23 years. (As far back as CBS records go; 1987).

Through nine weeks of the 2010 NFL regular-season, THE NFL ON CBS has earned an average national household rating/share of 11.3/24, up 15% from last year’s 9.8/21. This year’s 11.3/24 is the highest average rating for the first nine weeks of the AFC television package in 16 years (1994).

CBS Sports pre-game studio show, THE NFL TODAY, is averaging 4.422 million viewers for the first nine weeks of the 2010 season, up 26% over 2009’s 3.498 million and is the highest number of average viewers for THE NFL TODAY at this point in the season in 12 years (1998).

With the NFL and the NFL Players Association inevitably heading towards a labor showdown in March there are more than a few pigskin observers to believe the league’s television agreements may prove to be the key towards negotiating a new collective bargaining agreement.

"You've got an $8 billion business — take care of it," Hall of Fame coach Mike Ditka told the USA Today. "Make sure it doesn't go sour. Don't kill the golden goose.

"There's no one going broke in football."

On June 9 the NFLPA filed unfair labor complaint against the NFL and its owners claiming that the language in the leagues television contracts acts as a form of lockout protection for team owners, guaranteeing them revenues even if football isn't played in 2011.

The NFLPA (as Goodell alluded to the group that wants to be a union some days but not on other days) wants the $4 billion the league receives in television revenues placed in escrow until a new collective bargaining agreement is finalized.

"If it is the case that networks have obtained digital rights or other media rights for free in exchange for a promise that the full (TV) funds be available to teams even if games are not played necessarily means they left revenue on the table," Smith said during a conference call. "If there are facts from which a reasonable person can conclude they undertook these agreements with the idea of gaining bargaining advantages, the players would argue that would specifically be in violation."

When asked about the league's contention that the contract language is unchanged and money the networks lost through a lockout would have to be repaid, Smith replied: "We'll find out in discovery."

The NFL responded to the union's complaint with the following statement: "The television contracts that the union attacked today were agreed to during the worst economy in our lifetimes. Far from failing to maximize revenue, the contracts grew league revenue to fund higher player salaries and benefits. No wonder DeMaurice Smith said publicly this year, 'My hat's off to Roger Goodell. Television is locked up until 2014 to the tune of about $5 billion a year.' The union's meritless charges, including many inaccuracies, will be addressed in the proper forum, but they are simply a distraction and do nothing to get us any closer to a new CBA."

League counsel Jeff Pash told that in the event games were cancelled in 2011, the league would have to repay the networks. That negates any report that the NFL has their money in the bank.

Historically (the fallout from the 1994 MLBPA strike) sports fans do not react well to a labor stoppage, whether it’s fuelled by management (a lockout) or the players (a strike). Each week throughout the NFL season the NFL sends out a weekly press release (material included in this insider) regarding ratings. The same is true for the league’s broadcast partners they all send out news extolling the ratings generated by NFL programming.

"I think (the TV ratings) show a little bit of what fans are focused on," NFL commissioner Roger Goodell told the USA Today. "They hear there may not be football (in 2011), and our job is to bring football.

"I'd rather have them focus on the season."

Patriots owner Robert Kraft has been very vocal in his belief a new CBA will be reached. Indianapolis Colts owner Jim Irsay made it clear to the USA Today NFL owners are well aware the ratings the league is generating will have an impact on the CBA talks.

"It's something you want to do everything you can to avoid that and get something done," he says.

"It's something where you continually weigh all the things you're trying to do. People know this is a business, but people also know it's a love affair. It's something very special to all of us that are around it. So you have to weigh both."

And this year’s success follows a 2009 season that was one to remember for the NFL in terms of ratings numbers, when the average NFL game drew a 19-year-high of 16.6 million people watching.

Marc Ganis, a sports business analyst who is the president of SportsCorp believes if there is a lockout the NFL will indeed survive and thrive to see better days.

"This league, under Goodell, has shown a great ability to connect with the fans," Ganis told the USA Today. "And that's why you're seeing more 12-month-a-year activity by the NFL, and you're seeing more anticipation for the season and greater ratings as a result.

"If there is a backlash from the fans, it'll be shorter-term rather than longer-term."

There are a multitude of reasons the NFL has done as well as it has on television. More than anything else television has allowed the NFL to translate the experience of attending a football game to tens of millions of football fans every Sunday (as well as Monday nights and the occasional Thursday and Saturday) through their televisions. The development of HD television has worked very well for the NFL, making the television experience even more real for football fans every week.

From the very beginning of the television era, NBC was a prime innovator in football coverage. They became the first major television network to cover an NFL game, when on October 22, 1939, they televised a game between the Philadelphia Eagles and the Brooklyn Dodgers.

In 1950, the Los Angeles Rams and the Washington Redskins became the first NFL teams to have all their home and road games televised. In that same year, other teams made deals to have selected games broadcasted on TV. The DuMont Network then paid a rights fee of $75,000 to televise the 1951 NFL Championship Game across the entire United States.

By 1955, NBC became the televised home to the NFL Championship Game, paying $100,000 to the league. The 1958 NFL Championship Game played at Yankee Stadium between the Baltimore Colts and the New York Giants went into sudden death overtime. This game, known since as the "Greatest Game Ever Played," was seen by many throughout the country and is credited with increasing the popularity of professional football in the late 1950s and early 1960s.

CBS later became the first network to televise selected NFL regular season games in 1956.

When the rival American Football League (AFL) began in 1960, they signed a 5-year contract with ABC to cover their games. This became the first ever cooperative television plan for professional football, in which the proceeds of the contract were divided equally among member clubs. ABC and the AFL also introduced moving, on-field cameras (as opposed to the fixed midfield cameras of CBS and the NFL), and were the first to have players "miked" during broadcast games.

The NFL followed suit in 1962 with its own revenue sharing plan after CBS agreed to telecast all regular season games for an annual fee of $4.65 million. CBS' fee later increased to $14.1 million per year in 1964, and $18.8 million per year in 1966.

With NBC paying the AFL $36 million in 1965 to televise its games, and the increased, heated battle over college prospects, both leagues negotiated a merger agreement on June 8, 1966. Although they would not officially merge into one combined league until 1970, one of the conditions of the agreement was that the winners of each league's championship game would meet in a contest to determine the "world champion of football".

When the AFL and the NFL officially merged in 1970, the combined league divided its teams into the American Football Conference (AFC) and the National Football Conference (NFC). It was then decided that CBS would televise all NFC teams (including playoff games) while NBC all AFC teams. For interconference games, CBS would broadcast them if the visiting team was from the NFC and NBC would carry them when the visitors were from the AFC. The two networks also divided up the Super Bowl on a yearly rotation.

Also, ABC agreed to televise one regular season game per week on Monday night. ABC aired its first edition of Monday Night Football on September 21, 1970. MNF itself pushed the limits of football coverage with its halftime highlights segment, occasional banter from Howard Cosell and Dennis Miller, and celebrity guests such as John Lennon, Arnold Schwarzenegger and President Clinton. During its' 36-year run on ABC, Monday Night Football consistently ranked among the most popular primetime broadcasts each week during the NFL season.

eager to exploit that opportunity in 1987.

ESPN became the first cable network to broadcast regular season NFL games. Chris Berman helped redefine the pre- and post-game shows when he launched NFL Countdown and NFL Primetime, and they have since become the top-rated pre- and post-game shows on television. The cable network's contract to show ESPN Sunday Night Football marked a turning point for ESPN, transforming it from a small cable network to a marketing empire.

When ESPN first started televising NFL games in 1987, it only broadcasted Sunday night games primarily during the second half of the season. Meanwhile, ABC, CBS, and NBC maintained their rights to Monday Night Football, the NFC, and the AFC, respectively.
By 1990, Turner's TNT network started to broadcast Sunday night games for the first half of the season. The combined 1990 contracts with ABC, CBS, ESPN, NBC, and TNT totalled $3.6 billion, the largest in TV history. ABC was also given the rights to televise two playoff games per year, which was made possible after the league expanded it playoff format to include more teams.

In 1994, the league signed an exclusivity agreement with the direct broadcast satellite (DBS) service DirecTV to launch NFL Sunday Ticket, a satellite television subscription service that offers every regular season NFL game.

When new TV contracts were signed in December 1993, CBS (which had been home to NFC games for 38 years) lost their rights to the then-fledging FOX Network. FOX offered a then-record $1.58 billion to the NFL over four years for the rights, significantly more than the $290 million CBS was willing to pay. FOX was only seven years old and had no sports division, but it began building its own coverage by hiring many former CBS personalities such as Summerall and Madden. FOX's NFL rights ownership made the network a major player in American television by giving it many new viewers (and affiliates) and a platform to advertise its other shows. In the meantime, CBS lost several affiliates (mainly to FOX), and ratings for its other programming languished.

Meanwhile, NBC's rebound in their overall ratings in both the 1980s and 1990s (after years in the bottom of the ratings cellar) were attributed in part to its continuing coverage of the NFL. But with television contract re-negotiations in early 1998 ushering in the era of multi-billion dollar broadcasting agreements, an era of pro football broadcasting would soon came to an unceremonious conclusion. CBS, stung by FOX's surprise bid four years earlier, aggressively sought to reacquire some broadcasting rights. CBS agreed to pay $4 billion over eight years ($500 million per season) to air American Conference games. NBC, meanwhile, had indicated a desire to bid for Monday Night Football rights in 1998, but gave up when the financial stakes skyrocketed. And so, after six decades, NBC, the network that helped define pro football on television, lost its rights to air the NFL, thus marking the beginning of a slow decline for the Peacock network's sports division.

The other networks also signed eight-year deals in 1998. FOX extended its NFC deal by agreeing to a $4.4 billion contract ($550 million per season). ABC retained its long-time rights to Monday Night Football by also paying $4.4 billion over eight years. And ESPN agreed to a $4.8 billion ($600 million a season) deal to become the sole cable broadcaster of NFL games, marking an end with the league's association with TNT. And like previous TV contracts, the coverage of the Super Bowl was divided between the broadcast networks.

Will the NFL kill its golden goose – its television contracts if there is a lockout? Or as Marc Ganis suggests is the NFL a bullet proof television property one that can withstand labor armageddon? How will the NFL’s broadcast partners fill their Sunday programming if NFL games aren’t available next fall? These and many more questions will be answered in the coming months.

For this is Howard Bloom. Sources cited and used in this Insider Report: USA Today and Wikipedia

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