FULL MEDIA BLITZ
January 14, 1998
A bidding war for the rights to broadcast professional football games has left the NFL $17 billion richer. CBS, who lost its NFL contract 4 years ago, paid a record amount of money in hope of regaining lost market share. Following a background report, Phil Ponce and two media analysts discuss the significance of the contracts.
PHIL PONCE: The bidding war for who can broadcast National Football League games ended last night with one big winner: the NFL, itself. Broadcasters agreed to pay the League 17 billion dollars over the next eight years for the right to air the games on their respective outlets. Disney's ABC network kept what it calls its crown jewel by agreeing to pay $4.4 billion for the rights to broadcast Monday Night Football for the next eight years.
A RealAudio version of this segment is available.
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National Football League
The NFL scores big.
BOB IGER, President, ABC, Inc.: With the stroke of a pen, we've managed to greatly protect the value of one of this company's most important assets, the ABC Television Network, and its distribution system, with all of its affiliates and its own TV stations.
PHIL PONCE: ABC will air what traditionally has been one of television's highest rated shows one hour earlier at 8 PM Eastern Standard Time. Disney's cable network, ESPN, also won the rights to broadcast Sunday night games for eight years. And yesterday, Westinghouse-owned CBS announced it was back in the NFL family. CBS outbid NBC for the rights to air the American Football Conference or AFC games for the next eight years, paying an unprecedented $500 million per year.
SHAWN McMANUS, President, CBS Sports: First and foremost, we are not going to lose money on this deal. The value that the NFL brings to CBS in terms of incremental value to the television stations in terms of savings on this deal. The value that the NFL brings to CBS, in terms of incremental value to the television stations, in terms of savings on promotional time we would have to have bought if we didn't have the NFL, in the extra value it brings to our affiliates, I mean, the promotional value and all the other things this brings to the network, we are not going to lose money on this deal.
PHIL PONCE: The Fox Network, owned by Rupert Murdoch's News Corporation, stayed in the game by keeping the rights to broadcast National Football Conference or NFC games. It was Fox who outbid and bumped CBS out of the club the last time around. Here's how the bidding has escalated. For the term beginning in 1987, the networks paid the NFL a total of $1.4 billion; for the term beginning in 1990, $3.6 billion; the one starting in 1994, almost $4.4 billion; and for the one starting this year, ESPN will pay $4.8 billion, ABC $4.4 billion, Fox $4.4 billion, CBS $4 billion, for a grand total of at least $17.6 billion. This year one network was left on the bench, NBC. After 33 years of broadcasting the NFL, NBC, owned by General Electric, decided the price was too high for programming that has dropped in ratings over the last few years. NBC estimated that paying $500 million a year would cause it to lose $150 million per year. The network bidding frenzy makes the NFL the largest sports broadcasting contract, beating out the NBA, Major League Baseball, and the annual college basketball tournament.
PHIL PONCE: For more, we're joined by Elizabeth Lesly Stevens, who covers media and entertainment at Business Week, and Robert Wussler. He's a past president of CBS and a former president of CBS Sports. He was also the chief operating officer for the Turner Broadcasting System in the 80's. And welcome both. Mr. Wussler, a billion dollars here, a billion dollars there. Pretty soon you're talking about real money. Why is it that the networks want to spend that much?
Mr. Wussler: "What to one person may be a pig's ear is to another a sow's purse."
ROBERT WUSSLER, Former President, CBS: Well, Phil, it's all relative. What to one person may be a pig's ear is to another a sow's purse. Let's put it this way. Let's try to make things simple. I picked up a piece of wire copy a few minutes ago, and NBC announced this afternoon that they have renewed the dramatic series "ER" for $13 million an episode, 22 episodes a year, for three years. That's the better part of a billion dollars, $858 million. They have been paying something like, I think, $2 million a year per episode for the last three and a half years. So all--these things are all kind of relative.
For example, let's say that ER had not been renewed by NBC, had gone to Fox. Well, the ratings, because Fox has fewer television stations and on more UHF stations and things of that nature, the ratings would have dramatically suffered, had it gone to Fox, but it would still be the highest rated program that Fox had. So all these things are kind of relative. Remember, there are 100 million homes in America that have a television set. Most of them have more than one. Those television sets are on seven hours a day, three hundred and sixty-five days a year. So there's vast sums of money that are available. In a world where we're rapidly approaching 100, 200, 500 channels, you need the big play game, and the NFL certainly is an answer to that.
PHIL PONCE: Ms. Lesly Stevens, is the NFL an answer to a network's dreams, as far as making money?
ELIZABETH LESLY STEVENS, Business Week: It's not quite that way. The networks have been losing a great deal of their viewership to cable and other, you know, things you can do with your time. So they need any programming that guarantees them a big audience, even though the NFL, as you said in your clip, has been posting lower ratings year over year for quite a few years. So they're paying a great deal more and receiving less for it, but, you know, as they're losing viewers, you know, precipitously, they really need to do whatever they can to keep the viewers they can get. Also, football gives them young males, which, you know, those are very hard for us to bring to networks generally, so this is really the only thing they can do to bring those viewers to the network, and tell them what else is on.
PHIL PONCE: Why are young males so hard to attract as viewers?
ELIZABETH LESLY STEVENS: They just are. I mean, ironically, the other big magnet for them, especially on NBC, had been Seinfeld, so for NBC to be losing both football and Seinfeld leaves them with, you know, a hole to fill. And they need to find something that will bring those young male viewers to the network at all. Otherwise, you can lose them easily to cable like ESPN, or, you know, other programming.
PHIL PONCE: Mr. Wussler.
ROBERT WUSSLER: One reason why NBC quickly re-upped with ER today.
PHIL PONCE: Taking three hits in a short period of time would have created a bad buzz in the industry.
ROBERT WUSSLER: That would have been a very difficult thing for the NBC people to have withstood.
PHIL PONCE: One of the CBS people said in our introductory piece that CBS is not going to lose money on this deal. Is that so, do you think that's how it's going to work?
ROBERT WUSSLER: Well, it's hard to project what the next five to seven years, what the economy is going to be like. We've had, you know, several good years, both here in the country and in a television economy. But there have been hiccups in the last ten or twenty years. CBS bought baseball at a very expensive price in 1989, and had a write-off over a billion dollars. I don't think we're going to see anything like that, but the chances of CBS making money on this package over the course of the next five to eight years is on the slim side.
PHIL PONCE: Ms. Lesly Stevens, what did it do for the Fox Network to have gotten the NFL contract a few years ago?
The rise of Fox.
ELIZABETH LESLY STEVENS: Well, it really made the Fox Network, you know. Before it had been the fourth network, a challenger, and really an after thought in a lot of people's minds. And it transformed its fortunes, really at the expense of CBS. But what Fox did was, you know, come in with a bid so far and above what CBS was willing to pay in 1993, and at the time CBS's owner, Larry Tisch, had been very vocal that sports programming rights, even back then, were so out of line that it was--it put profits under such pressure that it wasn't worth pursuing. So he made a financial decision--CBS did--not to go forward. And Murdoch made a strategic decision to build the, you know, value of the Fox asset and get the football rights. That, you know, led to a whole slew of grief for CBS. Murdoch was able to snare away a great number of very important CBS affiliates, local stations throughout the country, got them to switch over to Fox, and CBS has yet to really recover and Fox, you know, has--though it does not make money on his football contract--even, you know, the previous football contract--you know, strategically, it allowed it to build itself into a much different sort of network, and, you know, a real leading network at this point.
PHIL PONCE: Ms. Lesly Stevens, in that case, why did NBC decide to let the NFL go this time? Doesn't it run the risk of having the same kinds of problems that CBS encountered?
ELIZABETH LESLY STEVENS: It runs a risk that, you know, it really needs to have football, but NBC's in a slightly different position. Of all the networks at this point it had the most other things going for it, programming wise, it has a great deal of other sports assets, coming up. It has Olympic rights through, I think, 2008; NBA. They have other sports programming to get those male viewers, you know, that they so badly need. They have them in the backs. They weren't as desperate as, you know, I think CBS was perceived to be this time around, and CBS had to get back in the game because it had lost so much the last time around when it lost football. And, in effect, CBS in getting, you know, the football contract away from NBC, is declaring to the ad community and, you know, others that it's still very much in the game and willing, and that's gauged in television nowadays by your ability to lose money.
PHIL PONCE: Mr. Wussler, what does it do to a network to have the NFL and what kind of--what kind of a--cast does it create for the network?
The "great halo effect" explained.
ROBERT WUSSLER: There's a great halo effect. For example, 60 Minutes was a top five program for fifteen or twenty years. With the loss of football it began to drop out of the top five. I think it finished 11th or something like that a year ago. It will be now back in the top five because with afternoon double header games starting at 4 o'clock, it will bring a tremendous audience flow into the 7 o'clock time period. Also, your ability to promote either new or existing comedies or motion pictures you're running either that night or early in the week, you can't buy that kind of audience flow, so it's--
PHIL PONCE: So during a football game a network will promote its other programs, and that's a big deal?
ROBERT WUSSLER: That's a big deal. And, remember, all these football games are going to be a little longer now because they were all given more inventory. They were all given another 90 seconds of commercial inventory during the three-hour game, so those games are probably going to start approaching three hours and ten minutes or three hours and fifteen minutes starting next September.
PHIL PONCE: And speaking of time, we're out of time. Mr. Wussler, Ms. Lesly Stevens, thank you very much.
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