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NFL could score huge bucks from TV deal strategy

COMPANY TOWN

By letting four major broadcast contracts expire in 2014, the NFL is betting that it'll then have the leverage to hike its rights fees. But success depends on the media landscape five years from now.

August 20, 2009|Joe Flint

The National Football League is making a big bet on 2014.

That's when its four big television deals are set to expire, which means the league will either have incredible leverage or find itself in a deep hole, depending on what the media landscape looks like five years from now.

The league engineered this little coup Wednesday by extending NBC's Sunday Night Football deal for two more years, through the 2013 season. Earlier this year, CBS Corp. and News Corp.'s Fox signed similar extensions for their Sunday afternoon packages. Walt Disney Co.'s ESPN Monday night deal is up at that time as well.

The NFL and its commissioner, Roger Goodell, are betting this will put them in the driver's seat when talks roll around despite the fact that viewing audiences are eroding. The league gets about $3.1 billion annually from those deals and pulls in an additional billion from DirecTV Corp. for its Sunday Ticket package, which gives subscribers access to all NFL games. That deal isn't up until after the 2014 season.

The NFL also has a deal with its own TV channel, the NFL Network, that pays the league about $400 million a year, although the money simply goes from one internal pocket to another.

"A vulnerable property would never do this," said David Carter, executive director of USC's Sports Business Institute, of the NFL's strategy.

Though the NFL has always been shrewd at negotiating steady increases in the rights fees it gets from its TV partners, having four major deals expire at the same time is not without risk. There's a school of thought that it is better to stagger your renewals as a hedge of protection should the economy go south or there is a big drop in ratings that could make the property less appealing.

There may also be fewer bidders in 2014, as broadcast networks are under extreme pressure to cut costs in the face of declining ratings and greater competition for advertising dollars.

And although the NFL is a premiere property that still draws mass audiences, whether CBS, NBC and Fox will be in a position to keep paying exorbitant rights fees remains to be seen. Cable networks are also facing similar pressures and are becoming more niche-focused, which could limit the appeal of a broad-based sports property.

Of course, the league's rationale for wanting to extend these deals now isn't entirely based on future leverage. The bad economy has hit it as well. Fewer corporations are buying luxury boxes, and families have less to spend on pricey tickets. Teams and the league have been trimming their own staffs.

On top of that, the league's own labor situation could get cloudy next year. Its contract with its players union is up after the 2010 season, and the NFL wants to have its TV revenue locked in for the foreseeable future should there be any unrest.

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joe.flint@latimes.com

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