https://groups.google.com/forum/#!topic/rec.arts.tv/OVglGWU4tJQ

by James Andrew Miller

It’s not outlandish to entertain a previously unthinkable prospect:
Might ESPN elect to go without rights to NFL games (http://awfulannouncing.com/espn/espn-guru-jim-miller-says-network-abandon-monday-night-football.html)?

In a span of less than five years, industry giant ESPN has seen its
narrative transformed from that of a mighty colossus into the hard-
luck tale of a ragtag warrior.

As it struggles to regain heretofore heroic heights — levels of
growth that are probably no longer attainable — ESPN has had to
endure a slew of significant workforce layoffs (with more reportedly
on the way) and a once-doting Wall Street that has turned a
skeptically cold shoulder. Astonishing increases in earnings,
previously viewed as faits acomplis, now seem like fantasies from
another world, thanks to the now-familiar combo of cord-cutting and
burgeoning rights fees.

With so much of ESPN’s universe asunder, it’s not outlandish now to
entertain a previously unthinkable prospect: Might ESPN elect to go
without rights to NFL games after the expiration of its eight-year
deal for Monday Night Football in 2021?!

“Impossible”? Yeah, we know — NFL games have been the backbone of
ESPN’s existence since 1987, and the biggest, most critical element
of its financial dominance ever since. The network basically can’t
exist without an NFL rights package.

Well, think again — like some execs at the network have started to
do — and consider the following:

First, quietly, ESPN has been able to pull off a dramatic judo move
in recent agreements with its affiliates, one whose importance
cannot be overstated: There is no longer specific contract language
that requires the cable giant to have NFL games in order to earn its
lofty (and industry-envied) subscriber fees, currently more than $7
per household. This means the network would not face automatic
decreases in that vital artery of its dual revenue stream. Sure,
distributors would be aghast, demanding to negotiate lower fees
probably immediately, but the point is, there would be negotiations,
enabling ESPN to do everything it could to keep those numbers as
high as possible.

Second, when ESPN agreed to pay $15.2 billion for its current
Monday Night Football deal, some of its key executives believed they
were buying the schedule of the previous MNF package, i.e., more
often than not, the best game or at least one of the top games of
the week. But Sunday Night Football got that pedigree, and Fox and
CBS games since then have also generally been more desirable than
ESPN’s matchups. With the advent of Thursday Night Football several
years ago, ESPN’s Monday night schedule has been further diluted of
quality matchups, and the network hasn't been shy about voicing
dissatisfaction.

NFL scheduling guru Howard Katz can keep more plates spinning in
the air than anyone else in sports, and he’s done the Lord’s work
trying to please everyone, but math is math, and there just aren’t
enough good games to go around. Yes, Monday Night Football ratings
are up about 5 percent this year over last year, but it’s still far
behind 2015’s viewership, for example. ESPN is averaging roughly 11
million viewers for its games; given myriad challenges the network
is facing, will parent Disney believe that an audience of that size
for only 17 weeks a year is worth billions?

Third, ESPN pays a disproportionally steeper rights fee for NFL
games than CBS, Fox and NBC, because ESPN's deals give it access to
NFL footage outside the games — NFL films and other NFL-related
opportunities. So, when ESPN's Pardon the Interruption, for
instance, wants to run a highlight, or SportsCenter and all the
network’s NFL shoulder programming want to dissect games and plays
till the cows wander home, ESPN producers can use all the NFL
footage they want. At the time of ESPN's last deal, industry experts
estimated that 15 percent to 20 percent of its total cost could be
attributed to those additional rights and privileges, and ESPN had
no choice but to pay up. How could the network survive without
those? The answer is they might not have to because of NFL
Capitalism 101: Cash Equals Truth. Can anyone imagine the NFL
turning down an offer from ESPN of $300 or $400 million for just
those rights, even if ESPN didn’t have game rights? It’s doubtful.

Which brings us to a fourth consideration: Timing for the next round
of NFL rights — beginning in a couple years — is turning out to be
rather propitious for the NFL. By then, digital players like
Twitter, Google and Facebook will have had time to decide if they
want to make what will be a huge leap from limited deals they’ve
done with the league, like Amazon’s $50 million deal for streaming
Thursday nights to the multiple billion-dollar price tags for actual
games. If they do, that increased competition could drive prices
even higher and further push ESPN out of the game. The league could
set aside Monday night as an experimental night for a digital player
that would be thrilled to be in the arena and wouldn’t be as
demanding, scheduling-wise.

Disney CEO Bob Iger was a key participant back in 2005 when ABC
declined to keep its NFL package because it was losing money, and if
Iger is going to fulfill the dreams of many in Hollywood and run for
president in 2020, he’ll want to walk in the cornfields of Iowa with
a track record as a financially responsible executive.

Finally, the NFL seems to be cuddling up closer and closer to a land
that was once thought to be on the verge of extinction: broadcast
networks. The league is worried about those cord-cutting numbers in
the cable universe and turned on by news like CBS getting more than
$2/household now for retransmission fees (Leslie Moonves, one of
broadcast’s more tireless and formidable champions, recently
estimated CBS might bring in as much as $2.5 billion a year by 2020;
that will certainly get the NFL’s attention). With the league’s
bromance with broadcast showing no signs of waning, ESPN’s chances
of getting Sunday night or one of the other Sunday games will be
difficult at best.

What might be the repercussions for ESPN if it decided not to
seriously chase down another NFL rights package? There would be both
bad and good news. Bad: it would be forced to come up with
provocative and meaningful alternatives to replace 17 weeks of lost
NFL games. But the good news is the network would have some serious
spending money it hasn't had in years. Take the $2 billion that it
is now giving the NFL, subtract say $350 million for rights to
highlights as described above, and another $250 million to send back
to Burbank the way Henry Hill gave Paulie that “tribute” money after
a big haul, and that still leaves a billion and a half dollars for
ESPN to play the media rights version of Wheel of Fortune. While
it’s true that nothing drives a sub fee like the NFL, ESPN could go
on a spending spree targeting CBS’ college football deal with the
SEC, a Big 12 deal, baseball post-season, rights to NHL hockey, EPL
soccer and a whole buffet table of other properties that would prove
beneficial in its negotiations with distributors who would want to
lower their sub fees.

Of course, there would be another added bonus of walking away from
NFL games, and that is not having to deal with the ramifications of
a story like that of the 6'1" and 14-year-old quarterback who could
throw a perfect spiral downfield to a receiver who didn’t have to
lose a step. As he was going through progressions later in the game,
his coach remarked he had never seen anything like this kid, and
that he would have it all — a big D1 career, shoe deals and even,
the coach predicted, a starring role in the NFL. Except that after
the game, the quarterback’s parents shared the news that this was
their son’s last football game. They had given him the choice of
being a starting pitcher or playing basketball, saying a violent
game littered with heavily documented brain injuries wasn’t on the
list for their son’s future career opportunities.