Operators Thrown by ESPN’s $15.2 Billion NFL Renewal

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ESPN will remain immersed in the pro pigskin
game into the next decade with an eight-year, $15.2
billion rights renewal with the National Football

Under the deal, ESPN retains the rights
to Monday Night Football, cable’s top franchise
with the Nielsens, during the 2014-21
seasons. It also greatly expands its international,
digital and highlights rights, with the
latter fueling some 500 additional hours of
NFL-related fare annually across an array of

But those programming benefits will come
at a steep cost: At $15.2 billion, the deal is the
largest in U.S. sports-media history and its average
price of $1.9 billion represents a 73% increase
from its $1.1 billion annual outlay under
its current eight-year pact that expires with the
2013 season.

While the size of the increase reflects the
prowess of the NFL as the pre-eminent sports
circuit, it also foreshadows rights hikes for the
league’s other TV partners. And though The
Walt Disney Co.-owned ESPN has said the
contract will not affect affiliate fees, it has rekindled
the debate regarding the high costs of
sports programming.


Escalating sports programming costs have
been a growing concern for cable operators
for years, sparking calls for sports networks
like ESPN to be placed on special tiers that
cost subscribers extra. Cable operators, already
facing triple-digit increases in retransmission-
consent fees amid one of the worst
economic climates in decades, are reluctant
to hand over fat increases.

American Cable Association president Matt
Polka also saw the deal as a blow to the small
operator. “ESPN has struck a bad bargain for
consumers,” Polka said in a statement. “The
sports network’s financially wanton deal will
push the cost of pay TV service into the stratosphere,
making the product less and less affordable
during a time of severe economic
stress and high unemployment. Evidently,
ESPN is pleased to be known as the worldwide
leader of hyper-inflationary price hikes.”

The cost increase to operators is not insignificant. According
to Sanford Bernstein cable and satellite analyst
Craig Moffett, the $800 million annual
increase in the NFL contract works
out to about 67 cents per month per customer.
Passing all of that onto distributors
would amount to a 14% annual
increase, based on the average wholesale
charge of $4.69 per subscriber per
month for ESPN.

Suddenlink Communications CEO
Jerry Kent, a long-time proponent of sports tiering, said that it
may be time to revisit that concept.
“We’re concerned that the proliferation
of sports networks combined with the
rising cost and forced bundling of those
networks is starting to price the average American household
out of the market,” Kent said. “Eventually, there will
be a breaking point, if the current trend continues, with programming costs outstripping the rate of inflation. A
la carte — especially the a la carte offering of sports networks
— may be the answer.”

The average monthly subscriber fee for ESPN is $4.69, according to SNL Kagan estimates — the highest in the
industry, this side of premium networks.

George Bodenheimer, president, ESPN and ABC Sports,
and co-chairman, Disney Media Networks,
during a Sept. 8 media call announcing
the pact said, “There’s so much
value for us in the this contract, obviously
we feel it’s an incredibly good deal
for our company. As far as the impact
of this deal itself, there will be no NFL
surcharge assessed on any distributors
as a result of this contract. Our affiliate
fees are already well-established in the
marketplace. In that regard, we can digest
this contract and begin on, and continue
to increase, the value to the fans
out there subscribing in both cable and

Later, when asked how other sports rights that have
been added of late might impact its monthly charges,
Bodenheimer said: “There is no portion of any of our fee that is associated with any one piece of product. Th e fee
we ask of our affi liates is based on the overall value of the
ESPN service.”

Among the long-term deals ESPN has concluded over
the past few years: a 15-year, $2.25 billion deal
with the Southeastern Conference; a 12-year,
$1.9 billion pact with the Atlantic Coast Conference;
and a shared 12-year, $3 billion rights
agreement with Fox Sports for the Pac-12.

ESPN’s multiplatform agreement, which begins
in 2014, includes 17 MNF telecasts, which
Bodenheimer labeled “a top-10 TV property,”
during the 2014-21 campaigns; expanded NFL
studio programming, which kicked off last
week; highlight rights for TV and ESPN.com;
the Pro Bowl; the NFL Draft; 3D rights; continued
Spanish-language rights on ESPN Deportes;
and enhanced regulars and post-season
coverage to international markets.

Bodenheimer said that ESPN was the leader
on the authenticated front — qualified
subscribers will be able to see MNF on WatchESPN
via iPads and tablets for the first time
under this new contract — and the pact will
“continue to help us lead the way doing that.”

He said that the WatchESPN, which has
been downloaded more than 3 million times
since its launch earlier this year, “enhances the
value of a cable subscription, allowing people
to enjoy NFL and Monday Night Football on
their iPads and tablets. I think it’s only going
to enhance our relationships with affiliates.”

Separately, MNF simulcasts will also migrate
to Verizon Wireless, as part of the latter’s
four-year, $720 million sponsorship pact with
the NFL that kicked off with the 2010 campaign.
Verizon also streams NBC’s Sunday
Night Football and NFL Network games, plus
the ad hoc NFL RedZone scoring/highlights
service covering the Sunday afternoon games.


The biggest content uptick for ESPN is tied
to the rights to more than 500 new hours
of NFL-branded studio programming per
year, which began last week. ESPN’s Emmy
Award-winning Sunday NFL Countdown
pre-game show will expands to three hours,
while NFL Live doubles to one hour during
its daily telecasts throughout the year.
Monday Night Countdown, NFL Primetime and NFL
Matchup will continue, and ESPN will create more NFLbranded
studio programming, including NFL 32 and NFL
Kickoff , both debuting this week.

Bodenheimer, in what he called the new contract’s
“most tangible benefi t,” said the new NFL agreement “will
touch 35 different shows across all mediums. Additionally,
it enhances international rights that we have. ESPN is
a global business, and this helps grow our entire footprint
around the world.”

One thing the deal doesn’t do is guarantee ESPN any
playoff games in the U.S. However, NFL commissioner
Roger Goodell said the contract does include “a path” for
ESPN to secure a Wild Card playoff game, but would not
put a timeframe on when ESPN might enter the postseason.
He noted that the league is committed to its current
format through the 2013 season and he didn’t “anticipate
any changes prior to that.”

Currently, NBC airs a pair of Wild Card contests, while
CBS and Fox televise one apiece on the NFL’s opening
playoff weekend.