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Entertainment / Media

Media Firms May Report Losses on NFL Contracts

Earnings: Walt Disney Co. and News Corp. may announce write-downs as advertising on telecasts of professional football games declines.

January 31, 2002|From Bloomberg News

Walt Disney Co.'s ABC and ESPN networks and News Corp.'s Fox Television may write down the value of their contracts to broadcast National Football League games by as much as $1 billion, analysts say.

Such a move would be an admission that the broadcasters, along with Viacom Inc.'s CBS network, paid too much when they signed a record $17.6-billion, eight-year contract with the NFL in 1998, said Richard Read, an analyst with Credit Lyonnais Securities Inc. CBS said it doesn't plan a write-down because its NFL broadcasts are profitable.

The prospect for NFL write-downs comes in the slowest advertising market in at least a decade.

Reducing the value of the current contracts may be used by networks to gain lower prices during the next round of TV-rights negotiations.

"Sports may help promote prime-time [programming] and draw younger viewers, but the economics don't make sense anymore," Read said.

Read and other media analysts said one or more of the companies may announce a write-down when they report earnings in the days before and after Sunday's Super Bowl.

Disney, which owns the ABC broadcast network and sports cable channel ESPN, might write down at least $600 million and Fox might write down as much as $400 million, Read said.

Fox spokesman Andrew Butcher and Disney spokeswoman Christine Castro declined to say whether the networks would write down their NFL contracts.

Viacom spokesman Carl Folta said CBS' broadcasts of professional football are "profitable for us." A write-down of NFL rights would be the first by a network in seven years.

Turning a profit on the NFL has become even more difficult in one of the worst media markets since World War II.

Advertising on NFL games on broadcast and cable TV has declined 24% this year, according to Competitive Media Reporting, a New York ad-tracking firm.

"There's just a glut of sports content and advertising spots out there right now," said Tom Wolzien, a media analyst with Sanford C. Bernstein & Co.

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