NFL Buyers, Sellers Could Butt Heads on Rates

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ESPN and its affiliated systems shouldn't count on
charging sponsors hefty advertising-rate increases to offset the bulk of soaring National
Football League rights fees, various ad-agency executives warned in the wake of the new
record-breaking NFL TV/cable contracts.

Fox Broadcasting, ABC, CBS and ESPN will shell out a
combined $17.6 billion across eight seasons. Of that total, ESPN alone will pay the league
$600 million per season.

While ESPN will ask cable operators to help foot the bill
for much of that expense, network, spot and local advertisers are on the hook, as well,
for significant price hikes

'This [rights jump] will impact on pricing,' said
Audrey Steele, senior vice president and director of strategic media resources for Zenith
Media Services. 'I expect a high premium on the NFL.'

Tom Winner, director of broadcast media at Wieden &
Kennedy, expected that ESPN 'will put pressure on affiliates -- and there'll be
resistance there, too.' Because of that, advertisers could feel the pinch, he said.

But Steve Bornstein, president and CEO of ESPN and ABC
Sports, sought to shoot down these buyers' scenario by maintaining that its
affiliates will be paying per-subscriber fees that are just 'a few cents more'
than today's.

Winner expected ESPN to offer affiliates such enticements
as increased local inventory and revenue sharing. At ESPN, George Bodenheimer, executive
vice president of sales and marketing, dismissed the revenue-sharing notion, but he said
it's 'likely' that operators will get more local avails to sell in NFL
coverage. ESPN, which will add three 30-second spots in each NFL game, is currently in the
process of 'fine-tuning the national/local split,' he said.

ESPN should also be able to soften the rights blow with
sales in its 'shoulder,' or peripheral, NFL shows like GameDay, for which
'it charges a good buck,' according to Steve Grubbs, executive vice president at
BBDO Worldwide.

Bodenheimer agreed that ESPN and the operators stand to
benefit from selling time on 'more than 400 hours of support programming,' from NFL
Countdown
on ESPN to NFL Tonight, due in August as a five-night-per-week series
on ESPN2. Noadditional commercial units will be added to these peripheral shows,
he added.

Even though ESPN and the other networks will no longer
offer any in-game segment sponsorships, Bodenheimer said, 'there will be
opportunities' for that within the peripheral programs.

ESPN's rights may have skyrocketed by 135 percent, but
buyers said there's a limit to how much the sellers can charge. Calling competition
the 'marketplace governor,' Winner said, 'The ability of any one network to
charge significant increases is limited' by clients' ability to go elsewhere.

While he's anticipating 'meaningful'
increases in ad rates from ESPN and the TV networks, Winner emphasized, 'There's
no way, no way they'll come close to making up the increase. I'll be
surprised if they get more than high single digits from us.' ESPN, he added, already
charges '[TV] networklike CPMs [cost per thousand homes], but it doesn't get
networklike ratings.'

Anticipating that ESPN will 'try to push the pricing
envelope' when it formally presents its new NFL packages sometime in April or May,
Grubbs warned that if its rates aren't in line with inflation and other factors, BBDO
will have to investigate other programming options that reach male demographics similar to
those reached by the NFL.

Bodenheimer said there's no timetable yet on formal
sales pitches to advertisers, but he added, 'We're always in touch with our
advertisers.'

On the operator side, Larry Fischer, president of Time
Warner CityCable, the ad-sales arm for the 1.2 million-subscriber Time Warner Cable of New
York City, said ESPN in network ad sales and the systems in local/spot sales 'can
only get what the market will bear. The market won't bear 30 percent or 40 percent
[rate] increases.'

In any case, he predicted, 'We'll do fine with
the NFL' when it comes to selling the future inventory. The back half [of the 18-game
season package] is always more valuable than the front half,' he added, whether ESPN
carries the entire Sunday primetime coverage or, as in the current contract, ESPN and
Turner Network Television split it.

A Comcast Corp. sales executive said only that 'the
NFL continues to be a very exciting product to sell because it attracts high ratings,
which is what advertisers want.'

Asked about the Federal Communications Commission's
rumblings about revising its rules so that subscribers don't continue bearing the
brunt of rising programming costs, Steele said such a change is unlikely to go into effect
soon, since she doubted that it would move quickly through the approval process.

Just before the NFL cable deal broke, FCC chairman William
Kennard said the agency should look into 'adjustments' to its rate rules.

'For example, our rules allow programming-cost
increases to be passed on to subscribers. But is this right? Should the consumer shoulder
all of the increased costs of programming, instead of sharing these costs among other
revenue sources, such as advertising?' Kennard said.

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