For TV networks, losing NFL season would be catastrophic
Original Article: The Washington Post, by Ben Strauss, July 2nd, 2020
Throughout the spring and into the summer — without the NBA playoffs and baseball’s opening weeks — the sports world has continued to feel the steady drumbeat of the NFL. The league opened free agency as usual, providing news-making moments such as Tom Brady signing with the Tampa Bay Buccaneers, and then its April draft went off without a hitch, delivering boffo ratings for ESPN.
For the TV networks and sports media outlets that cover the league, this has been most welcome. But as the calendar flips to July, with NFL training camps set to open at the end of the month, doubts have surfaced about the viability of football season. Novel coronavirus cases are spiking in states across the country. Anthony S. Fauci, director of the National Institute of Allergy and Infectious Diseases, said football players may need to be in a bubble environment for the season to be played. Los Angeles Rams Coach Sean McVay wondered aloud how teams will be able to both play and take precautions.
“I mean, we’re going to social distance, but we play football?” McVay said during a recent media appearance. “It’s really hard for me to understand all this.”
While there remains plenty of optimism the NFL will play — somehow, someway — networks are fixated on the league’s fall schedule given its dominant position as America’s most valuable television property. They are invested, of course, in the planned returns of Major League Baseball, the NBA and other sports, but none carry the importance of the NFL, which accounted for 41 of the top 50 rated telecasts of any kind in 2019. The lack of certainty has led to uncomfortable conversations among executives.
“It’s practically the only thing on the minds of the networks,” said John Kosner, a former ESPN executive who is an industry consultant. “If you lost an NFL season, you’re looking at a financial hemorrhage.”
All four networks that broadcast the NFL — CBS, ESPN, Fox and NBC — declined to comment on contingency plans or how they are thinking about the 2020 season. But a senior ESPN employee recently lamented that there is no fallback plan even worth considering if the NFL cannot play, because nothing can replace the content or revenue that comes with it, according to a person with knowledge of the discussion. At Fox Sports, at least one executive has told an employee that no NFL season would mean trouble for the network, according to multiple people familiar with the discussion.
No network is more dependent on the NFL than Fox, which pays more than $1.5 billion each year for two NFL packages: one on Sunday afternoon and the other on Thursday night. The NFL, including pre- and postgame coverage, accounted for nearly 40 percent of the minutes spent viewing the network last year, according to research firm MoffettNathanson.
For the league’s other broadcast partners, the NFL’s share of minutes viewed was smaller but still a hefty 10 to 13 percent last year. ESPN pays roughly $2 billion for “Monday Night Football,” CBS pays roughly $1 billion for its Sunday package, and NBC pays $950 million for “Sunday Night Football.” All bring in massive amounts of advertising for their NFL games.
Data compiled by advertising measurement firm iSpot illustrates how valuable the league is in terms of ad dollars. Last football season, CBS raked in roughly $1.5 billion in NFL advertising, which represents nearly 25 percent of the network’s total advertising haul for 2019 (not including the Super Bowl). NBC collected shy of $1.5 billion, also more than 20 percent of the network’s ad dollars for last year.
Fox was the most reliant on the NFL, bringing in nearly $2 billion from the league’s games last season, not including the Super Bowl — an amount that would be 40 percent of the network’s overall ad revenue from 2019. Additionally, advertisers that buy into NFL games often also must buy packages for other programming across a network’s schedule.
The NFL numbers at ESPN were somewhat less significant — around $500 million and less than 20 percent of its advertising revenue — but they don’t come close to capturing the importance of NFL highlights and discussion segments to the 24-hour cable network’s studio programming. ESPN is also the network that is likely to be affected most by a canceled or shortened college football season, which is considered by health experts to be at greater risk than the NFL because of its lack of a central authority, varying testing policies and uncertainty over whether students will be able to return to campus this fall. ESPN and its Disney-owned broadcast partner, ABC, received more than $1 billion in advertising revenue from the sport last year.
The NBA and MLB are more important to regional sports networks. The entire MLB season and playoffs delivered less than $700 million to national broadcasters ESPN, Fox, Turner and MLB Network in 2019. The entire 2018-19 NBA season and postseason accounted for a total of roughly $1.5 billion for ESPN, ABC, Turner and NBA Network, according to iSpot.
Since the pandemic began, ESPN, Fox and NBC have asked top talent to take pay cuts as they treaded water waiting for sports to return. Current and former executives predicted far more draconian developments without an NFL season — from layoffs to severe cost savings to networks being forced to take out large loans. One former Fox executive predicted studio shows would be hit the hardest.
“As the recent COVID-19 data points turn more negative, we are growing increasingly worried that the scheduled return of all sports in the coming weeks and into the fall will be impacted in different ways, leading to more pain for our media companies,” read a MoffettNathanson report published in late June.
In the longer term, said David Hill, a former president of Fox Sports, missing an NFL season hurts the broadcast networks in their battle for relevance against streaming services such as Netflix. Their main advantage in that struggle, Hill said, remains the NFL, and sports continue to be one of the key drivers for consumers paying for cable packages. According to MoffettNathanson, traditional paid TV subscriptions fell by 1.8 million in the first quarter of this year as the pandemic hit and live sports were mostly canceled. It was the highest-ever rate of cord-cutting in a single quarter.
“The NFL is absolutely key because it plays into the essence of what the network is,” Hill said. “It’s becoming the only way that networks can talk to consumers. If families are sitting in their living rooms watching the streamers — and they’re not turning on the networks for the NFL — there’s going to be less awareness in anything they’re doing.”
Regardless of whether the NFL season goes ahead, the league’s broadcast agreements are set to expire in 2021 and 2022, meaning the same networks will have to pony up what many observers expect to be large increases in rights fees — potentially as much as double the current figures, some industry insiders believe — even as they are potentially scrambling to patch budget holes for the current year. This week, Fox ended its broadcast agreement with the U.S. Open golf tournament several years early, a move that indicates a further commitment to its core properties, the biggest of which is the NFL.
“If you miss the NFL season, I think it makes the networks even more desperate to sign it again,” Hill said.
Still, alongside the simmering concern about what a lost season might do to the networks is the hope for what a season could mean. Given the high ratings for the draft, plus the possibility that fans won’t be allowed to attend games and people could still be limited in what they can do outside, there remains the chance 2020 could be a banner year for NFL broadcasts.
Hill said that, for whatever uncertainty exists now and in the coming weeks, he believes the NFL will find a way to play its season.
“It’s one of the very rare, absolutely must-have items,” he said. “And I would imagine that everyone being locked inside would be good for them, too.”
Prepared for Post-COVID Sports?
Original Article: Sports Business Journal, by Ed Desser and John Kosner, June 24th, 2020
“Crisis” derives from the Greek word “krisis,” which means “turning point in a disease.” While all of us hope for medical breakthroughs signaling the end to the COVID-19 scourge, we have no assurances right now. What we do have is time and with summer finally here, our recommendation is that all of us make the best use of that once in a career opportunity to put ourselves and our properties on firmer ground. From a rights/property holder perspective, we think you should focus on the following:
Phase One: Re-Think.
Have you put your most pressing problems into priority order? With revenues prospects down, how best to trim expenses? What do your media and sponsorship agreements state in terms of Force Majeure, and compensation adjustment procedures? How best to maintain these vital relationships? We are just beginning to understand the ramifications of COVID from a media rights perspective. Anticipate some form of renegotiation (see SBJ 5/18/20 “Follow the Money”).
But your people are central to keeping things together. Who are your most critical personnel, what are their key issues in this environment, and how do you keep them close and secure? What are you doing to complement Zoom communication? Who are your most vital customers, including fans and media partners, and what are you doing (communications, engagement) for them during this time-out? Are you using idle production capacity to help your media partners fill their huge un/under-programmed expanse of airtime?
In the midst of your team’s extended “home stand,” we suggest planning and organizational opportunities. Do some long term planning: Think about reorganization/streamlining to focus on high-return future opportunities. Three practical topics:
What is the status of your media agreements? What do you want these to be going forward – including whether or not you’re looking to expand your direct relationship with your fans?
How are you set up across existing and emerging social media platforms? Have you identified and connected with your sports’ key influencers? These will be even more important post-COVID; and
Where are you with your betting strategy? State-by-state betting legalization and mobile betting are likely now to accelerate as states need new revenue sources and fewer people will be going to casinos for the time being.
Phase Two: Re-opening.
Maybe you’re already open, maybe the time is coming soon. In-venue issues are vexing and both league and local governmental requirements are subject to change. Have you done the exercise to determine your capacity with 6-foot separation (e.g., killing every other row, and 1-2 of every 3 seats in occupied rows)? How you can maintain distance in concourses? One-way hallways or lane dividers? Your requirements for fans to wear face masks or bandanas (a new licensing and/or sponsorship opportunity?!). New security personnel or procedures? Arena surface cleaning measures? Are there new “doors” procedures you will need to implement, such as temperature checks at security screening locations, fan entrance and egress schedules, additional social spacing for fans waiting in entrance or concession lines, changes in concession and usher hygiene operations?
If – or once – you’re back, how can fans otherwise access your property (Linear TV, Streaming Video & Audio, Highlights, Social Media)? Expect more changes in fan expectation here. A unique COVID challenge is creating community around your team/sport if people can’t attend live? (we suggest tech to make “studio” sports more entertaining, improving your app, adding “Zoom Watch Parties”). Can social distance be achieved in a TV Truck? Another challenging issue is generating attention, audience, advertising, traffic, and sales when all othersports also come back at once … the scenario we expect to see by late summer.
Phase Three: Re-build.
The “new normal” is hard to imagine at the moment. Still, there are new processes that everyone is using now that you can implement going forward, such as (1) more work from home for employees and customers, (2) video conferencing for League and team events; and (3) use of newer technologies such as AI-tech for video highlights, live remote production, REMI and “Truck in the Cloud,” enhanced live viewing applications to both improve quality and lower costs, voice applications for “Hands-Free” experiences (“A new reality powered by AI,” SBJ, 4/13/2020).
Mostly though, we are encouraging you to think aggressively and creatively. Are there businesses you should consider exiting (e.g., retail, restaurants) or transitioning to online-only (box office, elimination of paper tickets)? Going forward, should your league consider a more unbalanced schedule and/or MLB-style (multi-games with a single opponent) home stands that cut down on travel and better protect player health? Game presentation adjustments to align with the new environment. And, of course, new sponsorship categories? The “Heat Check” seems too obvious to us! Official cleaning materials, gloves, N-95 masks, and disinfectants.
We don’t know how much longer the current fan-less sports hiatus will last or how severe the results will be long-term. Our training is to expect the difficult and prepare accordingly. We do believe our outcomes will be better if we can take advantage of this summer to plan, reorganize and prepare to emerge energetically. Sports fans, and all citizens need a return to a sense of normalcy which sports will provide again. We hope soon.
Ed Desser is President of Desser Media (www.desser.tv), a sports media consultancy. He was the senior media executive at the NBA for 23 years. John Kosner is President of Kosner Media (www.kosnermedia.com), a digital and media consultancy and an investor and advisor in sports tech startups. He was the senior digital executive at ESPN for 20 years. Together they ran broadcasting for the NBA in the 80’s and 90’s.
Is A Superstar Exodus From Traditional Media Coming?
Original Article: John Wall Street, by Howie Long-Short, June 9th, 2020
The New York Post recently reported that Jason Whitlock is “believed to be looking into starting his own direct-to-consumer business.” Unable to come to terms on an extension with Fox Sports, the former Kansas City Star columnist is said to be considering the possibility of “sidestepping traditional media” in favor of trying his hand as a standalone media outlet. It remains to be seen if Whitlock ultimately ends up launching his own endeavor (he told Front Office Sports that he had conversations with Jimmy Pitaro about rejoining ESPN prior to the pandemic), but with the tools needed to be successful widely available (think: email distribution, social media platforms, video and podcast capabilities), the roadmap set (see: Bill Simmons, Joe Rogan) and Coronavirus bound to negatively impact talent budgets across the industry it begs to wonder if other high-profile sports media personalities will look to launch their own platforms at the expiration of their current deals.
Our Take: John Kosner (Kosner Media) foresees a superstar exodus on the horizon “in part because top talent will have no choice but to examine what they could do [in a D2C capacity] moving forward.” The former ESPN EVP of digital/print media explained that as the established players’ own businesses continue to shrink (think: post-COVID economy in the short-term, cord-cutting in the long-term), their budgets for talent are going to decrease accordingly. When high-paid talent comes up on the end of their contracts, they'll likely have to decide between taking a salary reduction or launching their own digital outlet (or both).
““The Sports Illustrated of the future might be a collective of the most influential voices.””
Transformational talent (the D2C model only works for those on the A-List) no longer needs to work for an established media company with readily available D2C channels enabling them to both push out content and build a following. In fact, a prominent C-Level executive at one sports network suggested that remaining employed with a legacy player could actually hold capable individuals back from achieving a major financial payday. He cited Bill Simmons, who was reportedly earning ‘just’ $3 million/year at ESPN before leaving for HBO in 2015, as an example of a personality who brought significantly more value to his/her employer than he/she was being compensated for. The Ringer founder managed to parlay his brand and podcast empire into a $196 million payday back in February (Spotify bought the company).
If the D2C movement gathers steam Kosner suggested it could result in the creation of a new content bundle. “The Sports Illustrated of the future might be a collective of the most influential voices - each with their own digital subscription service - who could make more money packaged together then they could if they were each a standalone.” Customers would have the ability to personalize their individual package with their choice of different "experts".
Simmons, Dave Portnoy and Joe Rogan have all managed to experience tremendous success in the emerging D2C space, but that doesn't mean what they've done can be easily replicated. As Kosner reminds, “those men are personalities and there aren’t a lot of other examples of individuals who have built valuable media companies within the sports world." That's because aside from being hard work, it’s difficult to monetize digital media with the likes of Facebook and Google dominating ad budgets.
Subscription is the only viable business model for most in the digital space (few have the audience size needed to monetize existing platforms the way Rogan has), so a new media co. will likely need to generate content people would be willing pay for if it's going to be successful. That's easier said than done. Kosner said to build a paid subscriber base the outlet needs "to be in the business of telling the audience something they don’t already know (i.e. consumers are not paying for hot takes), be able to do it consistently and deliver the insight on platforms the audience cares about” (see: podcasting).
It reasons to believe there are media personalities who believe because they’ve managed to accumulate “tremendous follower numbers on platforms like Twitter and Instagram” that they could/would be capable of launching a widely profitable D2C subscription service. But it’s important to remember that none of those social media followers are paying for the content produced and as Kosner said it’s “not trivial to convert people who are used to being served content for free into paid subs; particularly when some - or all - of the personality’s best contributions are available for free elsewhere” (like on Twitter and IG).
If top-end talent ends up deciding to take salary reductions Kosner believes it could come with some additional freedoms (as opposed to the exclusive terms the legacy players currently enjoy). The tech and media investor said he“could see a scenario where the media personality remains with a traditional outlet to do television at a reduced salary (as that is where much of the advertising value lies), but they’re allowed to take their digital presence elsewhere” (and monetize to the best of their ability). The sports media exec we spoke to agreed and mentioned Pat McAfee and Clay Travis as examples of individuals already pursuing that path. “[Those guys] are selling their services almost as if they were individual studios.”