When league owners meet today and Wednesday in Jacksonville, Fla., one of the more significant items on their agenda will be a report on preliminary talks between the NFL and its network and cable partners for a new television deal.
The current $17.6 billion contract runs out after the 2005 season, but the league has had early discussions with all the incumbent principals -- and several potential new suitors -- with negotiations on a new deal expected to begin in earnest this fall.
The owners would like to extract more millions from broadcasters, though no one expects a landmark deal like the eight-year contract signed before the '98 season, at least on the network packages. Starting in the 1998 season, the league more than doubled its annual average rights fee from the previous contract, going from $1.075 billion a year from 1994 to '97, to an average of $2.275 billion a year over length of the current contract.
Even though the networks all have said they lost money on the previous eight-year contract, the NFL has never had a network television contract that did not increase from its previous deal. League executives and broadcasting industry sources indicate they do not expect the price to go down, particularly in a recently improving sports advertising market and with the game still drawing the highest ratings in sports television.
"The NFL is still the most valuable sports property in the industry by a large margin and conveys tremendous benefits to the carrying networks," said sports television consultant Neal Pilson, a former president of CBS Sports. "CBS realized it when they lost the NFL [to Fox in 1993] and Fox realized it when they got it. They've both experienced a huge benefit from carrying the NFL. This time, I would think there probably will not be competition for the Sunday afternoon packages. [CBS and Fox] will probably renew at a modest increase, between 5 to 10 percent in the overall deal."
The NFL has been typically mum on its expectations for the next contract. When asked in March if he expected a similar doubling of current annual TV revenues from the last contract in 1998, Commissioner Paul Tagliabue, who declined through a spokesman to be interviewed for this story, joked, "Triple."
"We're staying in touch to see if they want to do anything in terms of an extension before the season," said Denver Broncos owner Pat Bowlen, chairman of the NFL's television committee. "Something significant could take place over the next couple of months."
CBS, which lost the NFL after the 1993 season, got the property back in 1998, paying $4 billion over eight years for the American Football Conference package. Fox paid $4.4 billion for the NFC package and ABC committed $4.4 billion for "Monday Night Football." ESPN, like ABC a Disney subsidiary, spent $4.8 billion for the cable rights to the Sunday and occasional Thursday night schedule.
All three networks lost millions -- in 2002, Fox wrote down losses of $387 million on its $4.4 billion deal. But NFL programming also provides the highest ratings of any major professional sports league and the Super Bowl is the highest-rated program. Only ESPN, which relies on monthly subscriber fees paid by cable systems, made a profit on the NFL, according to industry sources.
"There is no question this product is unlike any other," Fox Sports President Ed Goren said. "Broadcasters know it, advertisers know it and the NFL knows it. Their ratings hold up. The erosion over 10 years has been minimal compared to the rest of broadcasting. Having said that, any NFL broadcaster wants to continue, but we've all lost money."
In recent months, there have been reports that Fox may form a consortium with cable operators, including Comcast, to create a national sports service that would compete with ESPN. That could include a bid for NFL cable rights and provide the NFL with a financial windfall on the cable side.
"We'd have to proceed very carefully if we do it," Rupert Murdoch, chairman and CEO of News Corp., the parent company of Fox, told Television Week in February. "We'd certainly do it with partners. . . ."
The Sunday night ESPN package and "Monday Night Football" are expected to receive the most interest. There also has been talk about Thursday games, though league sources indicate some owners are opposed because of the disruption to teams' weekly routine.
"Most people feel that it's highly likely ESPN will renew," Pilson said. "There's no question ABC is losing millions on Monday night, $100 to $200 million. The question they face is the same all the networks face. How much are they prepared to lose to keep the NFL?"
The NFL has traditionally negotiated from a position of strength, if only because there is always a network or cable operation on the outside trying to get in. NBC has been out of football since CBS outbid it in 1998, when NBC owner General Electric decided it was not prepared to accept the staggering losses CBS was willing to accept.
NBC Sports President Ken Schanzer declined to be interviewed for this story, as did CBS Sports President Sean McManus and ABC/ESPN Sports President George Bodenheimer. An NBC source said the network will get involved if the price can be justified.
The NFL has floated a number of ideas in an attempt to provide added value, including a change in Sunday starting times that would include 2 p.m. and 5:15 p.m. (Eastern) kickoffs. A later start would mean more West Coast viewers and a 5:15 p.m. kickoff would push the NFL into the higher prime-time advertising rates.
The NFL also has floated the possibility of unbundling the current AFC and NFC Sunday packages, meaning networks would have a mix every week.
"I think that would lead to the kind of confusion we now have in the NBA," Goren said. "I think the networks buy identity, and the identity of having each conference on its own network makes the most sense to us. In their own way, the league is trying to provide a greater value for their broadcasters. A later start time may be a help. But right now, it's the perfect product."