TV Upfront

TV Networks May Punt if NFL Football Is Lost

Some Ad Dollars to Go to Other Sports; Could Prime Time Benefit?

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Will the TV networks be sacked by the current NFL showdown?

Networks have lots to lose if there's a NFL lockout.
Networks have lots to lose if there's a NFL lockout. Credit: Reuters/Aaron Josefczyk

A recent legal ruling means they can keep the billions of dollars in rights fees they'd otherwise owe the NFL during a lockout, but it won't help them hold onto the ad dollars bound to fly elsewhere if football is a washout this fall.

With recent labor talks between players and owners suspended, and a lockout of players instituted by owners, all sides in the ad game surrounding the sport are left dithering on the sidelines. "We're telling our clients and planners that they need to be ready to move to alternate properties," said Kevin Collins, senior VP-director of national broadcast at Interpublic Group of Cos.' Initiative, which represents MillerCoors and other sports-focused advertisers. "You've got to move with the consumer experience."

Media buyers expect football's ad revenue -- approximately $3 billion a year across Fox, NBC, CBS, ESPN, NFL Network and DirecTV, according to an estimate from Wells Fargo Securities -- to migrate to other sports telecasts, and perhaps to some broadcast prime time, if the lockout eventually forces the league to cancel games. But few TV properties have the ratings that NFL football does, and advertisers could be left struggling to cobble together the mass-audience reach that they need and that football has helped them achieve.

"To tell you the truth, if they did cancel the football season, I don't think there's really any way to make up those GRPs [ratings points]," said Jeremy Carey, U.S. director at Optimum Sports, a divison of Omnicom Group.

Indeed, football properties have become some of TV's most sought-after in the last few years. Advertisers know the games bring in millions of viewers -- most of whom watch live, without DVRs and their ad-skipping technology. Last year, ad inventory for football started selling well in advance of the rest of TV as part of the annual upfront marketplace, during which marketers commit ad dollars to the coming fall season. Fox was able to sell out this year's Super Bowl by late October -- the earliest the match-up has sold out in recent memory. And renewed ad spending by U.S. automakers, coming off a tough financial period, has intensified interest in sports advertising.

Even so, ad buyers expect marketers to shower their wampum elsewhere, with college football, National Hockey League match-ups and late-season and post-season Major League Baseball games expected as beneficiaries. In some cases, ESPN and CBS, which show lots of college football; Fox and Turner Sports, which show post-season baseball championship games; and NBC and Versus, which deal with NHL contests, could stand to benefit.

But many of them will lose lots of ad money as well. According to Wells Fargo, CBS nabs approximately $825 million a year in ad revenue by showing AFC division games on Sunday afternoons. Fox snags approximately $975 million a year for airing NFC games. NBC, now operated by Comcast, sees about $850 million a year for its "Sunday Night Football" broadcasts; these games are one of very few bright spots at the ailing network. Disney's ESPN sees about $175 million each year for its "Monday Night Football" telecasts, Wells Fargo said.

Overall, networks could suffer a loss of short-term revenue, even as that recent legal ruling makes them secure that they won't lose the money they pay out for rights fees, according to research from Moody's. Yet the absence of NFL games from the schedule will make the job of reaching viewers and promoting other programs that much tougher, the ratings -research service said.

"The networks rely on powerful NFL programming to draw large audiences, which often stay tuned to the network for shows aired after the game," Moody's said. "The loss of this 'lead in' and 'lead out' programming, though hard to quantify, is considerable and will be their biggest challenge."

CBS and Fox could face the biggest hurdle, as there's precious little else available to air on Sunday afternoons that matches the power of professional football. NBC, which has in recent years had limited success in devising prime-time entertainment that snares the biggest audiences, would likely have to give up its big ratings on Sunday nights. ESPN has the least amount of skin in the game, as it features one NFL game a week (and will likely be covering the labor skirmish, which could bring in viewers).

NBC Sports, Fox Sports and CBS Sports declined to comment. "We are optimistic that everything will get resolved," ESPN said in a prepared statement. "We are evaluating a number of alternate programming scenarios to minimize the impact of potential lost games."

Might prime time benefit? NBC is expected to replace "Sunday Night Football" with regular prime-time entertainment, according to one media buyer familiar with negotiations. Because the networks typically lose money on big-ticket sports broadcasts (owing to high rights fees) and make stronger profits off their prime-time entertainment offerings, said Wells Fargo media analyst Marci Ryvicker, some football ad dollars that move to dramas, comedies and reality shows could help the networks' cause and help shore up stronger margins. With NFL football lost, advertisers could show more interest in big TV events, such as the debut of Fox's much-hyped "X Factor" in the fall.

When all is said and done, however, no one wants to see football go away. Advertisers will lose out on an important means of reaching masses of consumers in one fell swoop. TV networks will lose an important platform for touting the rest of their programming. Consumers will bemoan the loss of one of the nation's most heavily shared cultural touchstones. And the NFL risks a tarnishing of image that could take years to wipe clean.

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