Why TV Networks Might Not Mind if There's an NFL Lockout
The TV networks that carry NFL games will actually come out ahead if there's a prolonged NFL work stoppage, one ratings agency said today.
If the NFL and the players' union don't come to terms on a new collective bargaining agreement to replace the one expiring tonight at 11:59 p.m., the league will see some or all of its upcoming season jeopardized.
But because CBS, NBC, Fox and ESPN pay such huge sums for rights to show the games, sums that a judge ruled this week that broadcasters don't have to pay during any player lockout by owners, missing games would actually improve the networks' bottom lines, according to FitchRatings. Even if the networks did have to pay the fees, the NFL would pay them back with interest and extend their contracts by a year once the lockout was over, Fitch said in a note.
"In the event of missed games, the broadcasters would realize lower revenue, as the aired replacement content (likely re-runs to avoid incremental production costs) will not have the high ratings , significant advertiser interest and premium-priced ad spots associated with NFL games," Fitch said. "However, such a scenario would likely provide a one-time boost to EBITDA [earnings before interest, taxes, depreciation and amortization], as license fees would not be realized as expenses if the games are not shown and the related ad revenue not collected. High license fees generally result in sports programming being only minimally profitable to the broadcasters, and replacement content would be more profitable."
So why do networks pay for NFL games at all, if they're so hard to make money on? They attract massive audiences, to whom the networks then promote other shows on their schedules. Networks figure they come out ahead, but Fitch is arguing that a lockout wouldn't have much impact in the near term even if losing the games' promotional platform sapped ratings for other shows a little.
That may be more true for the Sunday afternoon broadcasts than ESPN's "Monday Night Football" and NBC's "Sunday Night Football," which is one of the most expensive shows to advertising in. These are prime-time landmark events that drive a lot of revenue while helping networks promote their other shows to very broad audiences.
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Contributing: Brian Steinberg